In the wake of Asian and European markets, Wall Street took a nosedive in pre-session. Futures are nevertheless reducing their losses as the open approaches. The American stock market, which recorded its worst session since October 2020 (for the Dow Jones) on Friday, should however still suffer on Monday in an environment that is hardly favorable to risky assets. In addition to the ongoing war in Ukraine, renewed concerns about a sharp slowdown in Chinese growth as COVID-19 pandemic-related restrictions increase in the country, as well as the prospect of accelerated monetary tightening in the United States United to counter galloping inflation hardly encourages optimism.
The last offensive remarks of the chairman of the Fed, Jerome Powell, seem to have particularly marked the spirit of the investors. The leader indicated that a hike in key rates of half a point is “on the table” for the May meeting, and hinted that other hikes of the same magnitude could follow quickly in order to curb inflation. Futures markets now attribute a 97.6% probability of a half-point hike in the fed funds rate in May, followed by an 85% chance of a major three-quarter point tightening in June, followed by another half-point hike in July, which would take the rate to 2.00%-2.25% by the end of July, according to CME Group's FedWatch tool.
This week will also be marked by a flurry of corporate publications across the Atlantic since no less than 180 S&P500 companies will be releasing their first-quarter results until Friday. Among them, the tech giants Microsoft, Alphabet, Meta, Apple, and Amazon will be particularly followed after the Netflix disappointment. So far, a fifth of S&P 500 companies have released their accounts for the first 3 months of the year with an overall positive result as 79% have done better than expected, according to the latest data from FactSet. However, the magnitude of the upside surprise is lower than the five-year average: 8.1%, compared to 8.9%.
Fears of a slowdown in activity in China are weighing heavily on commodity prices on Monday. The barrel of crude is thus consolidating strongly with a WTI which gives up more than 4.5% in electronic trading on the Nymex. Gold, for its part, fell 1.6% to $1,900 an ounce in London, down for the third consecutive session.
On the forex, the euro lost another 0.45% against the dollar, to $1.074, the lowest level since April 2020. More generally, the dollar index gained 0.35% to stand at 101.6 points against a basket of benchmark currencies, levels not seen since March 2020. Still, on the foreign exchange market, the People's Bank of China has just announced a relaxation of its foreign exchange reserve requirements with the aim of slowing the depreciation of the yuan. From May 15, the rate of compulsory foreign exchange reserves that banks must hold at the central bank will be lowered by 100 basis points, bringing it from 9% to 8%, in order "to improve the ability of financial institutions to use foreign currency funds".
Finally, the VIX, the famous 'fear index' which measures market volatility rose nearly 4.5 points to 29.5.
*Will Twitter win its bet? Somewhat dubious after the initial announcement of Elon Musk who wants to buy the social network and delist it, the market could well end up believing in the offensive of the boss of Tesla and SpaceX. As revealed by the American press, the richest man in the world met several Twitter executives on Sunday after seducing many shareholders of the bluebird by revealing the financial details of his offer of 43 billion dollars. Twitter would generally be more open to discussing a deal than it was before, a person familiar with the talks told 'Bloomberg'.
The South African-born American billionaire, who owns a 9.1% stake in Twitter, announced his acquisition plan on April 14, explaining that the social network needed to be delisted to be able to revive its growth. and become a platform dedicated to freedom of expression. The proposed price is $54.2 per share, or a total amount of more than $43 billion. According to the 'Wall Street Journal', an agreement could be finalized as early as this week. Several sources of 'Reuters' have even indicated that a deal could be concluded today.
* Exxon Mobil. Oil stocks fell in the wake of crude oil prices, affected by concerns for global demand due to prolonged health restrictions in China and the prospect of an upcoming rise in interest rates in the United States.
*Boeing. Germany will order 60 CH-47F
Chinook transport helicopters for around five billion euros, 'Bild am Sonntag' reported on Sunday, citing government sources.
* Apple. JPMorgan expects total and full-year iPhone revenue to be "slightly" below consensus. In addition, Foxconn, one of the group's main subcontractors, has suspended the activity of one of its production sites in China due to health restrictions.
* Coca-Cola has just unveiled results that exceeded market expectations in the first quarter. Over the period, the American soft drinks giant recorded EPS of 64 cents against 58 cents consensus for revenues up 16% to 10.5 billion dollars. Organic growth stands at 18% on an adjusted basis against a market consensus of 9.5%. The operating margin reached 32.5% against 30.2% a year earlier. The company estimates that the suspension of its activities in Russia will have an impact of 1 to 2% on its 2022 revenues and operating income and $0.04 on its adjusted EPS. It expects adjusted organic growth of 7 to 8% over the year and an increase of 8 to 10% in its non-GAAP EPS.
*KKR. The private equity group has raised $19 billion from investors for its new fund dedicated to the North American market, the largest in its history.