If we take a peek at the usual suspects—dollar, gold, and oil—they're holding steady, trading at slightly higher levels as yesterday. This suggests that the market's anxiety hasn't intensified much overnight. Today's spotlight is on the service sector activity data from Europe and the US, alongside an inflation indicator for the eurozone. These could sway rate expectations. A rate cut from the European Central Bank at its next meeting on October 17th is almost a foregone conclusion, and the Federal Reserve is also expected to ease monetary policy in November.
Yesterday, Wall Street's volatility was subdued, with major indices barely budging. The Nasdaq-100 was the standout, buoyed by Chinese online sales and semiconductor companies. Tesla shares dipped despite hitting sales targets. The ADP report showed the US private sector added more jobs than anticipated in September, which might influence the Fed's rate decision towards a smaller cut. Markets have calmed somewhat after the initial shock of Iran's missile launch towards Israel. While Tel Aviv and Tehran exchanged harsh words, the situation hasn't escalated further.
Rumor has it that Washington is working hard to prevent an Israeli strike on Iranian nuclear sites. The New York Stock Exchange ended slightly higher, with main indices making marginal gains. US job market indicators, like the JOLTS survey and the ADP report, show resilience, reducing the likelihood of a significant Fed rate cut on November 7. The odds now stand at 33.6% for a 50bp cut and 66.4% for a 25bp cut, according to CME FedWatch.
Last week, it was a coin toss. Two things to note: first, US rates are expected to continue falling. Second, the next Fed meeting is just after the US presidential election, and the winner might not be known immediately. In 2020, it took until November 7 to declare Joe Biden's victory after the November 3 vote.
European stock markets were mostly flat on Wednesday, though some show more movement. Norway's index jumped 1.5%, thanks to its oil-heavy composition. Spain's IBEX fell 0.6%, dragged down by Inditex and utility companies. The Paris Bourse stayed slightly positive, with TotalEnergies rising over 2% due to higher oil prices and a well-received presentation of its medium-term goals. In the Asia-Pacific region, Japan's Nikkei 225 bounced back 2%, while Hong Kong gained 1.5%. South Korea and Taiwan were closed for holidays. India dropped 2%, marking its fourth consecutive losing session. Australia is hovering around equilibrium. In Europe, the Stoxx Europe 600 is down 0.7%.
Today’s economic highlights:
Services PMIs in the UK, the eurozone and the United States, as well the durable goods orders and the ISM services index. The full agenda is here.
The dollar is slightly up to EUR 0.9061 and GBP 0.7625. The ounce of gold is steady at USD 2,649. Oil rose, with North Sea Brent at USD 75.54 a barrel and US light crude WTI at USD 71.70. The yield on 10-year US debt is up to 3.80%. Bitcoin is down to USD 60,500.
In corporate news:
- Tesla ‘s deliveries bounce back in Q3, but annual target slips further away. The manufacturer abandons the cheapest variant of the Model 3 in the United States.
- Microsoft to invest $4.75 billion in AI and cloud infrastructure in Italy.
- Levi Strauss announces a strategic review of the Dockers brand, including putting it up for sale.
- Eli Lilly invests $4.5 billion to open a new drug manufacturing and development centre.
- Berkshire Hathaway further reduces its stake in Bank of America to 10.2%.
- Delta Air Lines signs codeshare agreement with Saudia Airlines.
- StandardAero valued at $10.4 billion shortly after its initial listing on the New York Stock Exchange.
- Becton, Dickinson reaches agreement to resolve the ‘vast majority’ of hernia-related litigation.
Analyst recommendations:
- Eagle Materials Inc.: Baptista Research downgrades to underperform from outperform with a price target raised from USD 277.20 to USD 287.10.
- New Fortress Energy Inc.: Morgan Stanley downgrades to equalwt from overwt with a price target reduced from USD 35 to USD 15.
- Rtx Corporation: Deutsche Bank upgrades to hold from sell with a price target raised from USD 109 to USD 129.
- Charles Schwab: Autonomous Research downgrades to neutral from outperform with a price target reduced from USD 70 to USD 65.
- Stellantis N.v.: Barclays downgrades to equalweight from overweight with a price target reduced from EUR 23 to EUR 12.50.
- Tractor Supply Company: Evercore ISI downgrades to in-line from outperform with a target price of USD 300.
- Voya Financial, Inc.: JP Morgan downgrades to neutral from overweight with a target price of USD 87.
- American Airlines Group Inc.: TD Cowen maintains its hold recommendation with a price target raised from 7 to USD 9.
- Armstrong World Industries, Inc.: Baptista Research maintains its hold recommendation and raises the target price from USD 120.80 to USD 145.
- Carvana Co.: Citigroup remains neutral recommendation with a price target raised from USD 125 to USD 195.
- Constellation Energy Corporation: RBC Capital maintains its sector perform recommendation and raises the target price from 214 to USD 272.
- Deckers Outdoor Corporation: Piper Sandler & Co maintains a neutral recommendation with a price target reduced from USD 1000 to USD 166.
- Dollar Tree, Inc.: Guggenheim maintains its buy recommendation and raises the target price from USD 120 to USD 150.
- Guidewire Software, Inc.: JP Morgan maintains its overweight recommendation and raises the target price from 170 to USD 210.
- Humana Inc.: Deutsche Bank maintains its hold recommendation and reduces the target price from 349 to USD 250.
- Lam Research Corporation: Morgan Stanley maintains its market weight recommendation and reduces the target price from 774 to USD 77.40.
- Lululemon Athletica Inc.: Guggenheim maintains its buy recommendation and raises the target price from USD 350 to USD 525.
- New Fortress Energy Inc.: Morgan Stanley downgrades to equalwt from overwt with a price target reduced from USD 35 to USD 15.
- Sirius Xm Holdings Inc.: Guggenheim maintains its buy recommendation and reduces the target price from 30 to USD 29.
- Stellantis N.v.: Barclays downgrades to equalweight from overweight with a price target reduced from EUR 23 to EUR 12.50.
- Super Micro Computer, Inc.: Goldman Sachs maintains a neutral recommendation with a price target reduced from USD 675 to USD 67.50.
- Vistra Corp.: RBC Capital maintains its outperform rating and raises the target price from USD 105 to USD 141.
- Walt Disney Company (The): Guggenheim maintains its buy recommendation and raises the target price from USD 105 to USD 140.