Yesterday, the session saw results from several US banks, which are doing very well. The automotive sector is bouncing back (Daimler has raised its forecasts - again) despite the European Commission's shock plans for environmental policy. But beyond corporate news, it was US monetary policy that was the focus of attention yesterday. Jerome Powell succeeded in his communication exercise in front of parliamentarians. His task had been complicated by the release on Tuesday of high inflation figures in the United States. Powell tried to demonstrate that the scenario is unfolding as the Fed expected and that this overheating of prices is temporary. It can be summed up as: Yes, prices are surging, but no, it won't last, and yes, the Fed will continue to irrigate the economy to extend the recovery even if it has to scale back. As a result, the central bank is not expected to rush to cut back on inflation. Immediate fears have been dispelled but the skeptics are not convinced: it’s business as usual.
Meanwhile, in China... GDP for the second quarter of 2021 grew by 7.9% year-on-year, authorities announced today, which is not so bad, in lights of concerns hat had recently emerged about the strength of the Chinese rebound. Economists were expecting an average of 8%, so the difference is minimal. It was the eagerness of the PBOC, the Chinese central bank, to play on the levers of increasing liquidity recently that had raised fears of bad news. Experts noted this morning that consumption and production have been quite strong, with one exception, the auto market which is struggling to recover. It would appear that semiconductor supply tensions continue to weigh on the industry, which is investing less than expected in response. As for the PBOC's recent activism, I read this morning that it could be due to increased financing needs of the banking sector, faced with a rise in delinquencies. But we remain conditional, as the workings of the Chinese economy retain a degree of mystery that contrasts with the data on our ultra-monitored economies.
The two major events of the week - US inflation and its monetary consequences and Chinese GDP - passed without too much damage, which will give investors the opportunity to refocus on corporate results. A few big names are expected at the end of the week, but the serious business starts next Monday. Around 50 companies with a market capitalization of more than $50 billion are expected to report during the weekly sequence, and then three times that number during the last week of July. The analysis of their results will allow us to gauge the strength of the economic trajectory. What is certain, and somewhat unexpected, is that earnings reports will continue to use phrases like "unless new restrictions related to the coronavirus are implemented", as the pandemic is not yet a distant memory.
Today's economic highlights:
British employment figures, US Empire Manufacturing, Philly Fed and weekly unemployment figures, followed by industrial production. This morning, China announced a GDP growth of 7.9% in Q2, slightly below expectations (8%).
The dollar has risen to EUR 0.8464, while the ounce of gold has risen to USD 1825. Oil is trending lower after rumors of an OPEC+ compromise on production, with Brent crude trading at USD 73.72 per barrel and WTI at USD 72.00 per barrel. The yield on US debt has fallen back to 1.33% on 10-year. Bitcoin is trading under USD 32,000.
On markets :
* Morgan Stanley reported stronger-than-expected second-quarter profit growth as the group's investment banking business benefited from higher trading volumes and strength in the capital markets.
* Netflix announced Wednesday evening that it has hired a former Facebook executive to head its video game business, which is expected to allow it to expand beyond just online video. The stock is up 2.4% in pre-market trading.
* NortonLifeLock is in advanced discussions to merge with British cybersecurity specialist Avast, the latter announced Thursday.
* American International Group (AIG) is considering an initial public offering to sell a portion of its life and pension insurance business, which BLACKSTONE has already completed the purchase of 9.9% for $2.2 billion (1.86 billion euros), the two groups announced Wednesday evening. AIG shares were up more than 6% in after-hours trading.
* United Health - The health insurer gained 1% in premarket trading after reporting a better-than-expected quarterly profit and raising its full-year earnings forecast.
* Johnson & Johnson announced the recall of five lines of Neutrogena and Aveeno branded spray sunscreens after detecting a carcinogenic chemical in some samples.
* Beyond Meat - The plant-based meat producer announced Thursday the launch of a virtual store on Chinese giant JD.com's platform.
- Admiral: Berenberg maintains a hold rating with a price target raised from GBp 2,758 to 2,938.
- Asana : Oppenheimer adjusts pt to $77 from $43, maintains outperform rating
- Beazley: Citigroup initiates coverage with a Buy rating.
- Carlisle Companies Incorporated : Oppenheimer adjusts price target to $220 from $210, keeps outperform rating
- CrowdStrike : Oppenheimer adjusts pt to $300 from $225, maintains outperform rating
- The Estee Lauder Companies : Societe Generale starts at hold with $335 price target
- Focus Financial Partners : Oppenheimer adjusts pt to $64 from $63, maintains outperform rating
- Fortinet : Oppenheimer lifts pt to $300 from $225, maintains outperform rating
- Glaukos : Oppenheimer downgrades to perform from outperform
- Goldman Sachs : Oppenheimer raises price target to $540 from $493, keeps outperform rating
- Hiscox: Citigroup starts tracking at neutral with a target of GBp 910.
- InterContinental Hotels: Deutsche Bank upgrades from Hold to Buy targeting GBp5,600.
- Intuitive Surgical : Goldman Sachs lifts price target to $1,090 from $953, keeps buy rating
- L Brands : Telsey Advisory Group adjusts price target to $79 from $65, maintains market perform rating
- Paccar: Wolfe Research upgrades to peerperform from underperform.
- Palo Alto : Oppenheimer adjusts pt to $450 from $420, maintains outperform rating
- PepsiCo : Barclays raises price target to $165 from $155, maintains overweight rating
- NASDAQ 100 : Oppenheimer adjusts pt to $195 from $182, maintains outperform rating
- Tullow Oil: Berenberg remains at Hold with a price target raised from GBP 45 to GBP 50.