Wall Street rebounds despite rate pressure

Stock markets rebounded on Tuesday on Wall Street, and bond tensions didn’t discourage investors. Investors’ current priority is to curb inflation. Federal Reserve Governor Jerome Powell said on Monday he was ready to raise interest rates more aggressively as needed. This raised expectations for the bull market. Brent crude will stabilize at around $ 116 and yields on 2-year bonds will rise to 2.17%.

Two hours after closing, the Dow Jones rose 0.8% to 34,830 points, the broad S & P 500 index rose 1.14% to 4,511 points, and the Nasdaq Composite Index, rich in technology and biotechnology stocks. Recovered from 1.89% to 14,099 points.

Earlier that day, the European market also rose, with Eurostocks 50 up 1.1%, Frankfurt up DAX 30 1% and CAC 40 up 1.17% in Paris. In Asia, Nikkei rose 1.48% in Tokyo and the Shanghai Composite rose 0.2%.

The Fed wants to act “quickly” to curb inflation

In the bond market, yields continue to rise following Monday’s remarks by Jerome Powell. Interest rates on US 10-year T-Bond loans rose another 7 basis points (bp) to 2.37%, the highest since May 2019. The US “two years”, which reflects the evolution of short-term interest rates, rose 6bp to 2.17. It was%, but it was about 0.73% at the end of December last year. In Europe, the eurozone benchmark 10-year German foreign bond yield rose 4 bp to 0.50%.

Therefore, Jerome Powell was strong in its first statement on Monday since last Wednesday, when the Fed started a bullish cycle in the face of rising inflation and raised interest rates by a quarter point. Powell said controlling inflation requires “quick” action, adding that the Fed can resort to higher-than-usual rate hikes in some circumstances.

“If we conclude that it is appropriate to act more aggressively by raising the federal funds rate by more than 25 basis points at one or more meetings,” he said.

Two increases of 0.5 points in May and June?

The Fed wants to convince the market to do what it takes to bring inflation closer to the 2% target, even though some analysts believe the reaction is delayed. Powell acknowledged that supply chain issues were underestimated and their solutions remained uncertain. He believes that a soft landing of the economy will continue to be possible, but will be complicated to achieve, especially as the crisis in Russia and Ukraine exacerbated the risk of accelerated inflation.

CME Group’s FedWatch tool showed on Tuesday evening that the market expects the Fed to raise its key rate by 0.50 points at its next meeting on May 4th, with a probability of more than 66% going from 0.75% to 1%. rice field. Goldman Sachs Bank said it expects to rise 0.50 points in May and then twice in June.

EU split over Russian crude oil embargo

Oil prices (a key component of inflation) remained high on Tuesday, rising 7% the day before in anticipation of the EU’s embargo on Russian oil, but discussions are still ongoing.

Barrels of US light crude WTI (April futures contract) were stable at $ 112.05 on Tuesday, but barrels of Brent crude oil from the North Sea rose another 0.87% to $ 116.63 (May contract). became. According to Reuters, the EU is divided on whether to impose an embargo on Russia’s oil and gas imports, and no action is foreseen in the short term.

Gold fell 0.4% on Tuesday to close at $ 1,921.50 an ounce (April Comex contract). On the currency side, the dollar index peaks at 98.48 points (-0.02%) against a basket of reference currencies in the evening, while the euro rises 0.08% to $ 1.1023. Bitcoin increased 3.3% in 24 hours and was stable at around $ 42.5730, according to the Coindesk site.

On Tuesday’s Wall Street economics, the Richmond Fed’s regional manufacturing activity index was 13 in March, well above the balance-only consensus compared to a month ago. Therefore, the indicator reflects a sharp acceleration of activity.

Markets continue to monitor the war in Ukraine and its impact on businesses and markets. The Kremlin on Tuesday rejected Joe Biden’s accusations that Russia was ready to launch a cyberattack in response to Western sanctions. Moscow added that negotiations with Ukraine are ongoing, but Russia wants Ukraine to be more aggressive and substantive. The Kremlin also does not intend to publish the detailed elements of its request.

Value to follow

Nike (+ 2.8%) rose, following results and better-than-expected sales, despite lower sales in China. According to Nike, US sports equipment giants had net income of $ 1.4 billion, or 87 cents per share, down 3.3% from 90 cents in the same period in 2020. However, analysts surveyed by FactSet expected a profit of only 71 cents per share. Revenues for the quarter ending February 28 totaled $ 10.87 billion, up 5% from $ 10.36 billion in the previous year and surpassing the consensus of $ 10.6 billion. Gross profit margin increased from 45.6% in the previous year to 46.6%.

Nike welcomed the increase in sales and gross profit. This is especially due to the Group’s new strategy of increasing direct sales to consumers, which has been detrimental to certain distributors such as Foot Locker. Therefore, direct sales increased by 17% over the past year. + 14% for direct sales and + 22% for online sales. Throughout the channel, Nike sales increased in all regions, while revenue in China (including Hong Kong) fell 5% to $ 2.16 billion. In North America, the group’s largest market, sales exceeded expectations, rising 9% to $ 3.88 billion, and Americans found a way back to stores as their health improved. Sales in the Europe, Middle East and Africa zones increased 7% over the year to $ 2.77 billion.

Alibaba surged 12% after announcing a new two-year $ 25 billion share buyback program. The plan, which ends in March 2024, follows the previous $ 15 billion program. Hangzhou-based e-commerce giants are aiming to build investor confidence as stocks have fallen by two-thirds since their record highs in October 2020. And expansion plans. ” Toby Xu, Deputy Chief Financial Officer of the company, said.

Over the last 14 months, China has introduced radical new rules in the tech industry, often without warning. These decisions have shaken investor confidence and wiped out billions of dollars of capital from the country’s tech giants. However, the crackdown on this sector seems to be nearing its end. The latest statement by Xi Jinping and his deputy Liu He, who support the economy and the market, has been well received by businesses and has brought about a sharp recovery in the title of the local tech giant. Alibaba also announced this morning the appointment of a new independent director, Shan Weijian, chairman of PAG, an alternative asset management company. He will join the board’s audit committee and will replace Ericsson CEO Börje Ekholm at the end of the month.

Tesla (+ 4.2%) will offer its customers the first 30 Model Y cars manufactured at a huge factory in Grünheide, Germany, over € 5 billion this Tuesday, making it the largest car factory in Germany. Launched the first European production center, which is an investment. In recent history. The new Tesla Gigafactory is considered by experts to be important to the group. Managing Director Elon Musk arrived in Berlin for the event on Monday and tweeted, “Tomorrow we are excited to hand over the first mass-produced car manufactured in Giga Berlin-Brandenburg!” Tesla’s new factory is located approximately 30 km southeast of the German capital and will accommodate more than 10,000 employees. Tesla said Tuesday that more than 3,000 workers have already been employed.

At full capacity, the plant will produce 500,000 vehicles annually and more than 450,000 battery-powered electric vehicles sold worldwide by German rival Volkswagen in 2021. It also produces 50 gigawatt hours (GWh) of energy per battery, surpassing all other German factories. For the time being, Volkswagen remains the number one electric vehicle in the European market, with a 25% market share compared to 13% for Tesla. Musk said the increase in production would take longer than the two years it took to build the factory. JPMorgan predicts that the site will produce approximately 54,000 vehicles in 2022, 280,000 by 2023 and 500,000 by 2025.

Prologis (-0.25%), an American investment fund specializing in the management of warehouses and logistics buildings, has $ 21 billion to acquire Mileway (+ 3.5%), the division that brings together Blackstone’s logistics assets. The offer has started.