Central banks deployed three types of support measures when the economic impact of the pandemic had to be countered: asset buyback programs, financing for the banking sector and rate cuts. The European Central Bank, whose rates had already been at the bottom for five years, mainly used the leverage of buybacks and financing. This is an unconventional monetary policy in that it goes well beyond the traditional prerogatives of a central bank.
Many investors believe that the Fed will progressively end its asset purchase program – a process known as tapering - while keeping rates at or very close to the floor for a long time. A form of compromise that appeals to investors, who are in favor of keeping money flowing.
If this is the strategy adopted by the US central bank, this will ease fears this fall. And the Fed will have won the communication battle. At the same time, vaccination allows the US to count on a continued economic recovery despite the lurking coronavirus. It seems that the final acceptance of Pfizer and BioNTech's vaccine by the U.S. Food and Drug Administration, announced yesterday, could help convince some reluctant people to get vaccinated. In any case, the announcement had a positive effect on markets. Until now, the vaccine had only received emergency approval.
Yesterday's announcement of much lower-than-expected U.S. PMI indicators shows that the economic recovery may not be as strong as some had hoped, and the Fed should err on the side of caution at the end of the week in Jackson Hole.
Economic highlights of the day:
Germany’s Q2 GDP (revised from +1.5% to +1.6%). In the United States, the new housing figures for July and the Richmond Fed index for August are the main indicators.
The dollar/euro pair is trading at EUR 0.8511. The ounce of gold is back above USD 1800. Oil is moving around USD 69.7 for Brent and USD 66.4 for WTI. The 10-year T-Bond gains a small 1 basis point of yield to 1.27%. Bitcoin has lost some altitude, at USD 48,932.
* Tesla - Elon Musk said Monday that the electric vehicle maker is working to improve its autonomous driving software, the current version of which "is actually not great."
* A South Korean parliamentary committee may pass a bill Tuesday banning Google and Apple from requiring software developers to use their payment systems and thus charging up to 30 percent in commissions on transactions, which would be the first such move by a major economy against the tech giants.
* International Flavors & Fragrances has signed an agreement to sell its microbial control unit to German specialty chemicals maker Lanxess for $1.3 billion.
* Blackstone is in discussions to buy Interplex Holdings, a Singapore-based technology services provider, for at least $1 billion, according to two sources close to the matter.
* JD.com was up 8.6 percent in premarket trading after already gaining more than 3 percent the previous day in response to better-than-expected quarterly results.
* Banco Santander’s U.S. arm will buy the minority stake in its consumer division that it does not already own for about $2.5 billion.
* The Energy sector is up in the pre-market on the back of a rebound in oil prices.
* Theravance - The pharmaceutical company fell 28% in pre-market trading after its experimental treatment izencitinib for ulcerative colitis failed in an interim clinical trial.
- AGCO. Goldman Sachs raised the recommendation to buy from neutral. PT raised 22% to $161
- Cummins: Goldman Sachs cut the recommendation to neutral from buy. PT down 2.2% to $230
- Deere & Co: DA Davidson lifts price target to $371 from $359, neutral rating kept
- The Estee Lauder Companies: Argus adjusts pt to $375 from $360, maintains buy rating
- Hikma: Jefferies remains Buy with a price target raised from GBp 2870 to GBp 2950.
- International Consolidated Airlines Group: JP Morgan maintains his Buy rating on the stock. The target price is lowered from EUR 2.70 to EUR 2.45.
- Marks and Spencer: Berenberg remains Buy with a price target raised from GBp 195 to GBp 200.
- NCC Group: Canaccord Genuity cut its recommendation to hold from buy. PT up 3% to 340 pence
- Nov: ATB Capital upgrades to outperform from sector perform. PT jumps 47% to $18.50
- Nucor Corp: Seaport Global Securities reinstated coverage with a recommendation of buy. PT up 8.5% to $130
- Peloton Interactive: Oppenheimer adjusts pt to $140 from $150, maintains outperform rating
- Planet Fitness: Morgan Stanley initiated coverage with a recommendation of overweight. PT up 26% to $93
- Reliance Steel & Aluminum: Seaport Global starts coverage at Buy with $165 PT
- Snowflake: Jefferies lifts price target on snowflake to $275 from $250, maintains hold rating
- Steel Dynamics: Seaport Global starts coverage with Buy rating, $75 Price Target
- Trillium Therapeutics: HC Wainwright downgrades to neutral from buy, adjusts price target to $18.50 from $22
- Worthington Industries: Seaport Global initiates coverage with Neutral rating