On top of this, the US Bureau of Labor Statistics just revealed that the Producer Price Index (PPI) in the US for final demand rose to 7.3% on a yearly basis in June from 6.6% in May, which is way over the 6.8% expected. On a monthly basis, the PPI increased to 1% from 0.8%.
U.S. equity markets took a bit of a hit yesterday after the release of much stronger than expected June inflation, which further blunts investors' confidence in the U.S. central bank's theory that overheating prices are only temporary. However, Wall Street gave up only a little ground from the previous day's highs.
The strength of U.S. inflation, which reached 5.4% year-on-year, has led to several reactions, such as a strengthening of the dollar and a rise in U.S. bond yields. Economists may be speculating, but the numbers speak for themselves as the overheating seems to be spreading across all sectors, not just used cars or gasoline prices. Markets are now accepting that the Fed will have to take action to curb inflation by reducing the amount of cash in circulation, since this prospect has not led to any sharp movements. The debate will undoubtedly now shift to how quickly the central bank will have to unravel its buyback programs and begin to tighten rates. With their incorrigible optimism, investors may even be considering that the sooner the Fed acts, the less it will have to close the tap. Not so long ago, the mere mention of a change in monetary policy was the height of vulgarity. But you get used to anything on Wall Street.
But let’s not forget that this transition could bring volatility and strategies may have to be adjusted, no without turmoil.
In this respect, Jerome Powell is facing an important test today. He is scheduled to give an update on monetary policy to the House Financial Services Committee. The appointment has been scheduled for a long time but it comes the day after the release of inflation figures, which makes it highly strategic. Powell is expected to use the opportunity to send signals on the pace of tapering.
This coincides with the first series of quarterly results from large companies, especially U.S. banks.
Economic highlights of the day:
As well as June producer prices in the United States, the weekly US oil inventories are planned today.
The dollar is down to EUR 0.8458. The ounce of gold is back up to USD 1826, while oil has strengthened to USD 76.32 a barrel of Brent and USD 74.93 a barrel of WTI. The T-bond yield is back up to 1.40% over ten years. Bitcoin hovers around the USD 32,000 mark.
* Citigroup reported a better-than-expected quarterly profit on Wednesday, as the economic recovery allowed the bank to reduce provisions for potential defaults and offset a drop in net banking income due to lower transactions and loans.
* Wells Fargo reported a profit in the second quarter thanks to provision reversals, while expenses related to its business practices scandal stabilized.
* Bank of America saw its profit almost triple in the second quarter, thanks in particular to the reversal of provisions set aside last year, but its lending activities remain penalized by the low interest rate environment. The share of the American bank falls by 2% in pre-trade.
* Blackrock largely exceeded expectations on Wednesday with a 28% jump in second-quarter profit and a new record in assets under management, at $9.490 trillion (8.043 billion euros). In pre-market trading, however, the world's largest asset manager lost 1.5%.
* Apple has asked its suppliers to increase production of the next version of the iPhone to 90 million units this year, which would represent a sharp increase over last year's shipments, Bloomberg reported Wednesday. The news agency also reported that the U.S. giant is working with Goldman Sachs bank to develop a fractional payment service. J.P. Morgan added Apple to its analyst focus list. In pre-market trading, the U.S. giant is up 1.4%, which could lead to a record opening.
* Delta Air Lines is up 1.8% in premarket trading after the release of its quarterly results marked by above-expectation revenue and the airline's confidence in its annual profit on the back of a recovery in demand.
* American Airlines gained 3% in pre-market trading after saying it expects positive cash flow in the second quarter for the first time since the start of the pandemic.
* Nike - The European Court of Justice on Wednesday validated the European Commission's two-year-old investigation into the sports equipment maker's tax treatment in the Netherlands.
* Ebay has reached an agreement to sell a 10.2 percent stake in Norway's Adevinta, owner of the Leboncoin website in France, to private equity group Permira for $2.25 billion in cash, in order to obtain regulatory approval for the combination of their classifieds businesses.
* Alexion - The U.K. competition authority has approved AstraZeneca's $39 billion takeover of biotech company Alexion.
- Alibaba : Arete adjusts price target to $192 from $250, maintains neutral rating
- Burberry: Berenberg stays Hold with a price target raised from GBp1,820 to GBp2,050.
- Canada Goose : Goldman Sachs starts coverage at neutral with $46 price target
- Charter Communications : Goldman Sachs adjusts price target to $800 from $775, maintains buy rating
- Coca-Cola HBC: Jefferies remains Buy with a price target raised from GBp 2,900 to 2,950.
- Countryside Properties: Jefferies remains Buy with a target price raised from GBP 645 to GBP 661.
- First Republic Bank : Wedbush hikes price target to $225 from $215 after good results, maintains outperform rating
- Gap: Goldman Sachs initiated coverage at neutral. PT at $35
- Goldman Sachs : BMO Capital adjusts price target to $435 from $415, maintains outperforms rating
- ITM Power: Berenberg starts tracking at Hold with a target of GBP 400.
- Juniper: Wolfe Research upgrades to outperform from peerperform. PT up by 24% to $34.
- PepsiCo : Cowen lifts price target to $185 from $165, maintains outperform rating
- PVH: Goldman Sachs initiated coverage at buy. PT set to $127
- Newmont : Credit Suisse adjusts price target to $78 from $82, maintains outperform rating
- Ralph Lauren: Goldman Sachs initiated coverage at buy. PT set to $147
- SBA Communications : Goldman Sachs adjusts price target to $370 from $348, maintains buy rating
- Standard Chartered: Jefferies remains Buy with a price target reduced from GBp 629 to GBp 610.
- Tapestry: Goldman Sachs initiated coverage at neutral. PT set to $42,
- Tencent Music Entertainment : Arete downgrades to neutral from buy
- VF Corp: Goldman Sachs initiated coverage with a sell rating. PT set to $79
- Welbilt : William Blair downgrades to market perform from outperform
- XP Power: Jefferies starts tracking at Hold with a target of GBp 5,200.