The Weekly Wrap – Economic Data and COVID-19 Continued to Girate the Markets

The Stats

It was a relatively quiet week on the economic calendar, in the week ending 10th July.

A total of just 30 stats were monitored, following the 74 stats from the week prior.

Of the 30 stats, 20 came in ahead forecasts, with 9 economic indicators coming up short of forecast. 1 stats were in line with forecasts in the week.

Looking at the numbers, 24 of the stats reflected an upward trend from previous figures. Of the remaining 6, all 6 stats reflected a deterioration from previous.

For the Greenback, it was a 3rd consecutive week in the red. In the week ending 10th July, the Dollar Spot Index fell by 0.54% to 96.652. In the week prior, the Dollar had fallen by 0.27%.

COVID-19 updates drew greater focus, with a lighter economic calendar unable to distract the markets.

For the U.S, the daily COVID-19 numbers continued to spike to fresh highs in the week. At the end of the week, news of progress towards a successful treatment drug delivered riskier assets with support, however.

Looking at the latest coronavirus numbers

At the time of writing, the total number of coronavirus cases stood at 12,604,895 for Friday, rising from last Friday’s 11,175,074 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,429,821 on a global basis. This was higher than the previous week’s increase of 1,290,881 in new cases.

In the U.S, the total rose by 399,290 to 3,285,550. In the week prior, the total number of new cases had risen by 338,384. An upward trend was evident throughout the week once more.

Across Germany, Italy, and Spain combined, the total number of new cases increased by 7,406 to bring total infections to 743,215. In the previous week, the total number of new cases had risen by 6,464.

Out of the U.S

It was a relatively quiet week on the economic data front.

Key stats included June’s ISM Non-Manufacturing PMI, May’s JOLT’s job openings, and the weekly jobless claims.

The stats were skewed to the positive, with the U.S non-manufacturing sector expanding in June.

On the labor market front, JOLTs job openings increased from 4.996m to 5.397m. More importantly, the weekly initial jobless claims rose by 1.314m in the week ending 3rd July. This was down from 1.413m in the week prior.

While the stats were positive, COVID-19 updates from the U.S were particularly dire, providing the Greenback with some support.

In the equity markets, the NASDAQ rallied by 4.01%, with the Dow and S&P500 gaining 0.96% and 1.76% respectively.

Out of the UK

It was also a relatively quiet week on the economic calendar. June’s construction PMI, 1st quarter labor productivity, and house prices were in focus.

A sharp rebound in construction sector activity was positive, with the PMI jumping from 28.9 to 55.3.

House prices also bottomed out, with news of an adjustment to stamp duty thresholds also positive for the sector.

Ultimately, however, it was Brexit chatter that provided the Pound with support in the week.

Following the curtailed talks from the previous week, the EU hinted at a willingness to compromise, raising hopes of a deal.

In the week, the Pound rose by 1.11% to $1.2622, following a 1.19% gain in the previous week. The FTSE100 ended the week down by 1.01%, with a 1.73% slide on Thursday delivering the loss.

Out of the Eurozone

It was a relatively busy week economic data front, with Germany in focus.

Germany’s factory orders, industrial production and trade data for May were in focus in the week. On Friday, French and Italian production figures caught the market’s attention.

From Germany, the stats were skewed to the negative based on forecasts. Both factory orders and industrial production rose by less than forecast.

Germany’s trade balance came in ahead of forecasts, which provided some support.

Construction figures from Germany and the Eurozone’s retail sales figures for May had a muted impact in the week.

At the end of the week, industrial production figures from France and Italy delivered a boost.

For the week, the EUR rose by 0.46% to $1.1300, following a 0.26% gain from the previous week.

For the European major indexes, it was a mixed week. The CAC30 fell by 0.73%, while the DAX30 and EuroStoxx600 saw gains of 1.15% and 0.38% respectively.

For the Loonie

It was a relatively busy week on the economic calendar.

Key stats included June’s Ivey PMI, housing data, and the all-important employment figures for June.

The stats were skewed to the positive. The Ivey PMI jumped from 39.1 to 58.2 in June. More impressively, employment jumped by 952,900 following a 289,600 rise in May.

As a result of the jump in hiring, the unemployment rate fell from 13.7% to 12.3%.

While the stats were skewed to the positive, COVID-19 jitters and a negative monthly IEA report weighed.

The Loonie fell by 0.33% to end the week at C$1.3592 against the Greenback. In the week prior, the Loonie had risen by 0.27%.

Elsewhere

It was a relatively bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 10th July, the Aussie Dollar rose by 0.16% to $0.6950, with the Kiwi Dollar rising by 0.66% to $0.6574.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar, with no material stats to provide direction.

While there were no stats, the RBA was in action on Tuesday, standing pat on monetary policy. This was in line with market expectations, limiting any major moves by the Aussie Dollar.

In the week, the government closed down the border between Victoria and New South Wales due to fresh new cases…The latest spread pinned the Aussie Dollar back in the week.

For the Kiwi Dollar

It was also a relatively quiet week on the economic data front.

Key stats were limited to 2nd quarter business confidence figures and June electronic card retail sales figures.

While both were Kiwi Dollar positive, there was nothing impressive to give the Kiwi a major boost.

For the Japanese Yen

It was a quiet week on the data front.

Household spending figures for May delivered more bad news early in the week. Year-on-year, household spending was down by 16.2%, following an 11.1% decline in April.

Month-on-month, spending fell by 0.1%, following a 6.2% slide in April. In contrast to other economies, consumers appeared unwilling to loosen the purse strings, which will be of concern for the government.

While the stats were negative, concerns over COVID-19 delivered the upside for the Yen in the week.

The Japanese Yen rose by 0.54% to end the week at ¥106.93 against the Greenback. In the week prior, the Yen had fallen by 0.27% against the U.S Dollar.

Out of China

It was a quiet week on the economic data front, with June inflation figures in focus.

The stats were skewed to the positive, though ultimately of little influence.

A lack of chatter from Washington and Beijing allowed the markets to move beyond the recent war of words.

Tensions over Hong Kong are unlikely to abate anytime soon, however. Positive sentiment towards an economic rebound in China drove demand for equities in the week.

News had also hit the wires in the early part of the week of a reported priority to foster a “healthy” bull market.

In the week ending 10th July, the Chinese Yuan rose by 0.95% to end the week at CNY6.9994 against the Greenback.

The CSI300 rallied by 7.55% in the week, with the Hang Seng gaining 1.40%.

European Equities: A Week in Review – 11/07/20

The Majors

It was a mixed week for the European majors in the week ending 10th July. Partially reversing a 1.99% gain from the previous week, the CAC40 fell by 0.73% to lead the way down.

The DAX30 and EuroStoxx600 reversed losses on Friday, however, to end the week with gains of 0.84% and 0.38% respectively.

It had been a bullish start to the week before the majors hit reverse.

Optimism over a swift economic recovery shifted to material concerns over a rising number of new COVID-19 cases in the U.S and beyond.

While the U.S administration remained adamant over a continued reopening of the country, the COVID-19 numbers suggested otherwise.

In the week, the WHO had also acknowledged that there was emerging evidence of airborne transmission of the coronavirus. A lack of social distancing and a continued reopening across the U.S in particular, coupled with airborne transmission sounded the alarm bells.

A bullish end to the week, however, came as the markets responded to industrial production figures from Italy and France.

The Stats

It was a relatively busy week on the Eurozone economic calendar.

Key stats included May Factory orders, industrial production and trade data from Germany. While many economies had reported sharp rebounds from the dire numbers from April, Germany’s were less impressive.

Factory orders rose by 10.4%, partially reversing a 26.2% slump in April. Industrial production rose by just 7.8% following a 17.5% slide in April. Both sets of numbers fell short of forecasts to pin back the European majors.

Germany trade figures were positive later in the week but were not good enough to ease concerns over COVID-19.

German construction numbers for June and Eurozone retail sales figures for May had little influence in the week.

At the end of the week, industrial production figures from France and Italy provided much-needed support.

In Italy, industrial production surged by 42.1% in May, reversing a 20.5% slide from April. France reported a 19.6% jump in production, which reversed a 20.6% slide from April. The recoveries were far more impressive than Germany’s that had weighed on the majors earlier in the week.

From the U.S

The stats were skewed to the positive, with the markets preferred ISM Non-Manufacturing PMI jumping from 45.4 to 57.1.

JOLTs job openings for May were also positive, rising from 4.996m to 5.397m, with initial jobless claims rising by 1.314m. This was down from 1.413m in the week prior.

Ultimately, however, the positive stats had little influence mid-week. The rising number of COVID-19 cases across the U.S suggests a possible reversal of the recent improvement in economic indicators…

The Market Movers

From the DAX, it was a mixed week for the auto sector. BMW and Volkswagen led the way, with gains of 2.26% and 3.03% respectively. Continental and Daimler ended the week with losses of 1.59% and 0.16% respectively.

It was also a bullish week for the banking sector. Commerzbank jumped by 10.35%, with Deutsche Bank gaining 5.81%.

WIRECARD AG fell by 23.01%, partially reversing a 131.21% gain from the previous week.

From the CAC, it was a mixed week for the banks. BNP Paribas and Credit Agricole rose by 1.10% and 1.49% respectively, while Soc Gen fell by 0.85%.

The French auto sector also had a mixed week, with Peugeot falling by 1.75%, while Renault gained 0.54%

Air France-KLM and Airbus ended the week down by 4.39% and by 0.27% respectively.

On the VIX Index

It was a 4th consecutive week in the red for the VIX. In the week ending 10th July, the VIX fell by 1.41%. Following on from a 20.3% tumble from the previous week, the VIX ended the week at 27.29.

Economic data from the U.S managed to support gains for the U.S majors. The weekly gains across the U.S majors came in spite of the widespread spike in new COVID-19 cases.

At the end of the week, the Dow and S&P500 found strong support on news of progress towards a successful treatment drug.

The S&P500 ended the week up by 1.76%, with the Dow and NASDAQ gaining 0.96% and by 4.01% respectively.

The Week Ahead

It’s a quieter week on the Eurozone economic calendar. Key stats include July’s ZEW Economic Sentiment figures for Germany and the Eurozone.

The Eurozone’s industrial production and trade data for May should have a muted impact on the majors in the week.

There are also finalized inflation figures that will likely be brushed aside by the markets.

On Thursday, expect the ECB’s monetary policy decision to be the main event of the week. There has been some recent discord within the ranks. This will make the ECB press conference all the more interesting…

From elsewhere

Economic data out of China, which includes 2nd quarter GDP figures, will garner plenty of attention in the week. There has been plenty of optimism over a sharp economic rebound in China. The proof will be in the pudding…

If that’s not enough, there are also trade data and industrial production and fixed asset investment figures for June to consider…

From the U.S, June retail sales and industrial production figures, together with July manufacturing sector PMIs will provide direction.

Away from the Economic Calendar

COVID-19 numbers and related news in the week will also have a material impact on the majors. If the situation worsens, expect risk appetite to wane. While news late in the week of successful treatment was positive, the latest spread does continue to jeopardize a swift economic recovery.

And, if that’s not enough, earnings season kicks off this coming week…

US Stock Market Overview – Stocks Rise Led by Financials; the Nasdaq Hits a Fresh All-time High

US stocks moved higher on Friday driven by gains in the Dow Industrials. The financials led the way. Most sectors were higher, technology bucked the trend. News before the opening bell that Gilead’s drug Remdesivir, which is a coronavirus treatment, reduces the risk of death in severely sick patients by nearly 60%. The US treasury note yield slumped to 57-basis points before rebounding into the close to settle above 60-basis points. New coronavirus cases in the U.S. rose by more than 63,000, another single-day record, as hospitals in Texas, California and other states strain to accommodate a surge of new patients. US producer prices came out weaker than expected with core intermediate goods looking the index lower. Next week the earnings season will kick off with the large US banks. JP Morgan is scheduled to release Q2 earnings before the opening bell on Tuesday.

Amazon Say Employees Must Remove Tick Tok

Amazon.com is now requiring its hundreds of thousands of employees to remove the TikTok app from mobile devices. Amazon said in a staff memo Friday that employees must delete TikTok by Friday to be able to continue accessing their email from their phones.

Producer Prices Fall More than Expected

The US producer price index (PPI) dropped 0.2% last month after rebounding 0.4% in May. Year over year through the 12-months ending June, the PPI declined 0.8%, matching May’s decrease. Expectations were for a 0.4% rise in June and a 0.2% fall in May. Excluding the volatile food, energy producers’ prices rose by 0.3% in June. The core PPI dropped 0.4% on a year-on-year basis in May, which was the largest annual decrease since 2013.

Carlsberg Shares Jump Nearly 6% on Hopes of Better H1 Operating Profit; Target Price DKK 1,000

Carlsberg, a Danish multinational brewer, said its business in China rebounded strongly and western European region saw an improved demand towards the end of the second quarter due to the gradual reopening of the on-trade channel and subsequent restocking in many markets, sending its shares up nearly 6%.

The world’s third-biggest brewer after Anheuser Busch InBev and Heineken said it anticipates operating profit to decline 8.9%, total volumes to fall by 7.7% and revenue to dip 11.6% in the first half of this year.

Carlsberg shares gained over 40% since March’s trough and were trading 5.37% higher at the time of writing. The full interim financial statement for H1 2020 will be published on August 13, 2020.

In Asia, Carlsberg’s Chinese business rebounded strongly in the second quarter, and profits improved significantly, driven by cost reductions as many marketing activities were postponed until the second half of this year. Sales in other Asian markets were significantly impacted by the lockdowns, especially the businesses in India and Nepal.

Carlsberg stock forecast and price target

Morgan Stanley target price is Danish Krone 955.00 with a high of DKK 1,100 under a bull scenario and DKK 575 under the worst-case scenario. UBS raised the target price to DKK 720 from DKK 660; Berenberg cuts target price to DKK 1,010 from DKK 1,032.

Barclays raised target price to DKK 988 from DKK 923; Jefferies raised price target to DKK 1,000 from DKK 950 and JP Morgan raised to overweight from neutral, raising the target price to DKK 1,050 from DKK 825. We expect it is good to buy as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity with a target of DKK 1,000.

Analyst view

“Carlsberg is our top pick with more resilient earnings than peers due to (1) geographic mix – its lack of exposure to Americas/Africa and presence in China may speed up top-line recovery, while limited overlap with ABI means it should avoid the worst of the competitive pressures; (2) cost focus – it should be better able to offset top-line headwinds than peers, thanks to its cost management focus, and deliver margin upside in the longer term; (2) low leverage at <2x net debt/EBITDA affords more balance sheet flexibility compared to highly levered peers. The stock is trading at a discount to EU Bevs peers, which we consider unwarranted,” Pinar Ergun, equity analyst at Morgan Stanley noted.

“We forecast an -11% OSG decline in 2020 followed by an +11% increase in 2021. We expect Carlsberg to be the only European Bevs company to recover back to its 2019 EPS level by 2021, thanks to cost-saving and buybacks (aided by its strong balance sheet). This performance (plus the long-term margin and CF generation opportunity) supports a premium valuation: 23.5x 21E P/E is c12% premium to the EU Beverages sector P/E of 21x,” she added.

For the stock list on the Nasdaq, four analysts forecast the average price in 12 months at $158.97 with a high forecast of $158.97 and a low forecast of $158.97. The average price target represents a 501.02% increase from the last price of $26.45. From those four, three analysts rated ‘Buy’, one rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

U.S. Stocks Set To Open Lower As Traders Focus On Virus Data

U.S. Reports More Than 60,000 New COVID-19 Cases For Second Day In A Row

On Thursday, the U.S. reported another record daily increase in the number of coronavirus cases. The pandemic shows no sign of slowdown and starts to put pressure on stocks which continue to trade on high levels.

Most market observers do not expect that the U.S. will implement a second full lockdown as the economy will not be able to take a second hit of this size. Still, the rising number of infected will inevitably put pressure on economic activity as consumers will stay worried about their financial position and health.

Previously, the market has mostly ignored the bad news on the coronavirus front as traders bet that monetary stimulus will continue to provide support for asset prices.

Today, S&P 500 futures are losing some ground in the premarket trading session but it remains to be seen whether stocks will finish the day in the red zone as many traders are focused on buying any pullbacks.

U.S. – China Relations Continue To Deteriorate

The U.S. has sanctioned high-ranked Chinese officials due to alleged human rights abuses against Uighur minority in China.

China has already stated that it will introduce counter-measures against the U.S. China did not provide any details about such measures.

U.S. – China relations are in a clear downtrend which may pose risks for the world economic recovery if countries start to implement more serious measures against each other. For now, the announced sanctions will have no impact on global trade.

WTI Oil Dips Below The $40 Level

Yesterday, I wrote that trading in a tight range was not typical for a volatile commodity like oil. Apparently, some traders lost patience waiting for an upside breakout, and oil declined below the important $40 level.

At this point, oil did not develop significant downside momentum. Currently, it trades near the $39 level. If the downtrend accelerates, oil-related stocks will decline to lower levels, putting additional pressure on S&P 500.

The next few trading sessions will show whether oil has sufficient support below $40. Without such support, oil may soon find itself closer to the 50 EMA at $36.

For a look at all of today’s economic events, check out our economic calendar.

Healthcare Could Be Silver Bullet for Walmart in Long Term; Target $140: Morgan Stanley

Walmart Inc, an American multinational retail corporation that operates a chain of hypermarkets, has recently moved into the healthcare space with its own insurance business which could be a ‘silver bullet’ for the world’s largest retailer over the long-term, according to Morgan Stanley.

Walmart on July 8 revealed that it has created an insurance company named ‘Walmart Insurance Services LLC’ to sell Medicare insurance with its groceries and clothing, starting from August.

“There is scant detail around Walmart’s overarching health strategy aside from the fact that it wants to improve access to, and reduce the costs of, healthcare in the US. From that perspective, a multi-pronged approach makes a lot of sense and recent steps are clear indications this is what Walmart is pursuing. We don’t know if/how Walmart plans to directly monetize CareZone, or the details of its pricing/distribution strategy in relation to selling health insurance,” Morgan Stanley’s analysts wrote.

In June, Walmart bought CareZone’s medication management technology and intellectual property, in a move to strengthen its digital health presence. The largest retail corporation owns four health centres in the United States, which provides counselling and dental care to its customers at a low price – annual checkup for $30 or a strep test for $20.

“These two initiatives are certainly going to be immaterial to Walmart’s P&L in the near- to medium-term. However, its huge customer base and a gigantic market opportunity to reduce inefficiencies make Walmart’s deeper foray into healthcare sensible, in our view. We expect to see its suite of initiatives grow over time,” analysts added

Morgan Stanley target price is $140 with a high of $180 under a bull scenario and $100 under the worst-case scenario.

“Comps accelerate to +MSD-HSD led by continued Grocery strength. Sustainable U.S. e-comm growth of 50-60%+ behind click & collect momentum and traction with long-tail assortment. PhonePe gains wider market appreciation, driving incremental multiple expansion,” Morgan Stanley highlighted as upside risks to Walmart.

“E-commerce losses begin to rise again after briefly moderating. U.S. e-comm growth slows to <30% (comps <2%). Greater than expected Flipkart losses,” Morgan Stanley highlighted as downside risks to the world’s largest retailer.

Twenty-three analysts forecast the average price in 12 months at $138.15 with a high forecast of $150.00 and a low forecast of $120.00. The average price target represents an 8.14% increase from the last price of $127.75, according to Tipranks. From those 23, 19 analysts rated ‘Buy’, four analysts rated ‘Hold’, and none rated ‘Sell’.

“As the lines between Retail, Healthcare & Tech blur, WMT’s growing suite of initiatives make it a sleeping giant to watch,” analysts added.

European Equities: COVID-19 and Geopolitics in Focus

The Majors

It was a 3rd consecutive day in the red for the European majors on Thursday. The CAC40 fell by 1.21%, with the DAX30 and EuroStoxx600 declining by 0.04% and 0.77% respectively.

Rising COVID-19 cases across the U.S continued to weigh on demand for riskier assets.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Thursday. Germany’s trade data for May were in focus ahead of the European open.

According to Destatis, Germany’s trade surplus widened from €3.4bn to 7.6bn in May. Economists had forecast a widening to €5.2bn.

  • Exports increased by 9.0% in May, partially reversing a 24% slump in April. Economists had forecast a 13.8% rise.
  • Imports rose by 3.5%, following a 16.6% slide in April. Economists had forecast a 12% rise.

Compared with May 2019

  • Germany exported goods to the value of €42.4bn (-29.0%) to EU member states.
  • Exports to Eurozone member states fell by 29.1% to €29.9bn.
  • Germany exported goods to the value of €37.7bn (-30.5%) to countries outside of the EU.
  • Germany imported goods to the value of €38.4bn (-25.2%) from EU member states.
  • Imports from Eurozone member states fell by 25.2% to €26.7bn.
  • Germany’s imports from non-EU countries fell by 17.5% to €34.8bn.

From the U.S

The all-important weekly jobless claims figures were in focus late in the European session. In the week ending 3rd July, initial jobless claims rose by 1.314m. While this was better than a forecasted 1.375m and previous week 1.413m, it was still sizeable.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Continental and Daimler fell by 1.31% and by 2.73% to lead the way down. BMW and Volkswagen saw more modest losses of 0.74% and 0.09% respectively.

It was also a bearish day for the banks. Deutsche Bank fell by 1.99%, with Commerzbank sliding by 4.42%.

WIRECARD AG led the way down with a 9.19% slide coming off the back of a 15.53% tumble from Wednesday.

From the CAC, it was another bearish day for the banks. Soc Gen slid by 3.57%, with BNP Paribas and Credit Agricole falling by 2.31% and 2.33% respectively.

The French auto sector saw yet more losses, with Peugeot and Renault declining by 2.28% and by 1.91% respectively.

Things were no better for Air France-KLM and Airbus SE which fell by 2.26% and by 3.96% respectively.

On the VIX Index

It was back into the green for the VIX on Thursday. Following a 4.59% fall from Wednesday, the VIX rose by 4.20% to end the day at 29.26.

COVID-19 did the damage on Thursday, which overshadowed the better than expected jobless claims figures.

The S&P500 and Dow fell by 0.56% and by 1.39% respectively, while the NASDAQ rose by 0.53%.

VIX 10/07/20 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the Eurozone economic calendar. There are no material stats to provide the European majors with direction.

A lack of stats will leave the majors in the hands of geopolitics and COVID-19 at the end of the week.

On Thursday, this optimism had wavered as new COVID-19 cases continued to rise across the U.S. A similar trend from Thursday will be another test for the bulls.

From the U.S

It’s also a relatively quiet day on the economic calendar, with wholesale inflation figures for June due out later today.

We don’t expect the figures to have any influence on the majors on the day, however.

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 213,647 to 12,376,273. On Wednesday, the number of new cases had risen by 222,368. The daily increase was lower than Wednesday’s rise while higher than 190,716 new cases from the previous Thursday.

Germany, Italy, and Spain reported 1,190 new cases on Thursday, which was up from 986 new cases on Wednesday. On the previous Thursday, 1,027 new cases had been reported.

From the U.S, the total number of cases rose by 59,638 to 3,218,570 on Thursday. On Wednesday, the total number of cases had increased by 62,416. On Thursday, 2nd July, a total of 48,853 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the Dow was up by 117 points.

For a look at all of today’s economic events, check out our economic calendar.

US Stock Market Overview – Stocks Close Mixed as Nasdaq Continues to Rally

US stocks were mixed on Thursday as the Nasdaq continue to rally but the Dow and S&P 500 declined. Most sectors in the S&P 500 index were lower, led down by declines in Energy and Financials, technology shares bucked the trend. Amazon continued to rip higher rising 3%, after initially falling early in the trading session. As concerns over the reclosure of some states economies rise, Amazon has continued to outperform. Jobless claims came out better than expected showing that the US jobs market is stabilizing. Stocks declined mid-day following a ruling from the US supreme court that will allow the Manhattan DA to enforce a subpoena for criminal activity.

Jobless Claims Rise Less than Anticipated

The Labor Department reported that weekly jobless claims were lower than expected last week. Claims for the week ended July 4 totaled 1.314 million, compared with the 1.39 million expected. The total marked a decrease of 99,000 from a week earlier. The four-week moving average of claims, fell 14,000 to 1.43 million. Continuing claims fell sharply, dropping 698,000 from a week earlier to 18.06 million. The previous week’s total itself was revised down by 530,000. Wall Street had been expecting 18.9 million continuing claims.

Court Say Trump Documents Must Be Released for Criminal Activity

The Supreme Court announced on Thursday that the New York district attorney could enforce a subpoena for President Trump’s financial and tax records. They also reported that the decision to allow Congress access needed to be returned to a lower court.  The decisions at the supreme course were both on 7-2 votes on Thursday send the cases back to lower courts, where Mr. Trump can raise additional objections to the subpoenas. The rulings put off, likely until after the November election, the attempts to explore Mr. Trump’s finances.

Walgreens Boots Flips to Loss in Q3; Target $50 in Bull Case and $30 in Bear

Walgreens Boots Alliance Inc, a global retail pharmacy provider, reported a loss in the third quarter compared with a profit a year earlier, hammered by non-cash impairment charges of $2 billion in Boots UK as the ongoing COVID-19 pandemic severely impacted businesses worldwide.

The company reported an operating loss of $1.6 billion, compared to operating income of $1.2 billion a year ago; Adjusted operating income decreased 46.5% to $919 million on a reported basis, down 46.4% on a constant currency basis, the company said.

Walgreens’ loss per share was $1.95, compared to earnings per share of $1.13 a year ago; Adjusted EPS decreased 43.8% from $1.47 to $0.83, down 43.4% on a constant currency basis; Results reflected $0.61 to $0.65 per share estimated operational impact from COVID-19.

Both operating income and adjusted operating income included an adverse impact of $700 million to $750 million from the above items, or $0.61 to $0.65 per share, excluding impairment charges. Walgreens Boots Alliance Inc also announced plans to reduce 4,000 workforce at pharmacy chain Boots UK.

Executive comment

“Prior to the pandemic our financial performance for fiscal 2020 was on track with our expectations. However, this unprecedented global crisis led to a loss in the quarter as stay-at-home orders affected all of our markets. I’m very proud of how all of our teams mobilized and adapted to deliver essential services in our communities across the world,” Executive Vice Chairman and CEO Stefano Pessina said in a press release.

“Shopping patterns are evolving more rapidly than ever as consumers further embrace digital options, spurring us to accelerate our ongoing investments in digital transformation and neighbourhood health destinations. This includes our two recent announcements: a significant expansion of our primary care clinics collaboration with VillageMD, and our strategic partnership with Microsoft and Adobe to launch a personalized omnichannel healthcare and shopping experience.”

Walgreens Boots’ stock price forecast

Four analysts forecast the average price in 12 months at $47.75 with a high forecast of $50.00 and a low forecast of $45.00. The average price target represents a 12.91% increase from the last price of $42.29. All four analysts rated ‘Hold’, none rated ‘Buy’ or ‘Sell’, according to Tipranks.

Morgan Stanley target price is $45 with a high of $58 under a bull scenario and $30 under the worst-case scenario. BofA Global Research cuts price objective to $43 from $44 and Mizuho cuts target price to $48 from $53 and Cowen and Company cuts price target to $48 from $54.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

Analyst view

“Walgreens Boots Alliance operates a top 2 retail pharmacy chain in the U.S. as well as Boots Pharmacy and Alliance drug distribution in Europe. FY20 guidance calls for a turnaround in core US business but delivering on EBIT outlook relies on improving fundamentals which are out of the company’s control, including better script trends, brand inflation, and front end,” Ricky Goldwasser, equity analyst at Morgan Stanley noted in June.

“Walgreens has the balance sheet to deploy capital into M&A, as well as the strategic optionality to potentially reposition its portfolio of assets in a changing healthcare marketplace. Unveiling a new strategy that provides a roadmap to future growth is a potential catalyst for shares,” she added.

Asia-Pacific Indexes Up Across the Board Led by Gains in China

The major Asia-Pacific stock indexes were higher on Thursday, led by fresh gains in China. European shares are also rising following a two-day setback. The price action indicates that investors are looking past simmering U.S.-China tensions and renewed coronavirus lockdowns to upcoming company earnings, hoping that global stimulus efforts will yield upbeat outlooks.

On Thursday, the Nikkei 225 Index settled at 22529.29, up 90.64 or +0.40%. Hong Kong’s Hang Seng Index finished at 26210.16, up 80.98 or +0.31% and South Korea’s KOSPI Index closed at 2167.90, up 9.02 or +0.42%.

China’s Shanghai Index settled at 3450.59, up 47.15 or +1.39% and Australia’s S&P/ASX 200 Index finished at 5955.50, up 35.20 or +0.59%.

COVID-19 Update

The number of cases in the U.S. surpassed the 3 million mark, according to Johns Hopkins University. As cases and deaths rise, data compiled by Apple Maps shows driving activity is slowing down across the country, which could be a warning sign for the economic comeback.

Globally, more than 11.88 million people have been infected while at least 545,398 lives have been taken, according to data compiled by Johns Hopkins University.

China Reports Inflation Data

In fresh inflation data out of China early in the session, the country’s producer price index was down 3% year-on-year in June, compared to expectations for a 3.2% decline according to analysts polled by Reuters.

The consumer price index, meanwhile, fell in line with Reuters-polled expectations, rising 2.5% year-on-year for the month.

Australian Share Market Closes Higher

The Australian share market closed higher, after shares in Afterpay led a rally among tech stocks, while mining and energy stocks also boosted the market.

Mining and energy stocks led the broad-based rally. Technology shares surged, led by buy-now, pay-later operators Afterpay and Zip Co.

Corporate News

Rio Tinto said more than 2,000 jobs would go in New Zealand, as it announced plans to close its aluminum smelter in the country because of high power prices.

Meanwhile, Afterpay shares hit a fresh record high above $75 following an upgrade from Morgan Stanley. Analysts there raised their price target on the stock to $101, saying the company’s latest earnings were much stronger than expected.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Stocks Set To Open Higher As Continuing Jobless Claims Report Beats Expectations

Initial Jobless Claims Decline To 1.31 Million

The U.S. has just provided new Initial Jobless Claims and Continuing Jobless Claims reports.

Initial Jobless Claims declined from 1.41 million to 1.31 million. Analysts projected that Initial Jobless Claims would total 13.75 million.

Continuing Jobless Claims report was much better than expected as Continuing Jobless Claims declined to 18.1 million compared to analyst estimates of 18.95 million.

The decrease in Continuing Jobless Claims supports the thesis that the U.S. economy is rebounding faster than previously expected.

Not surprisingly, S&P 500 futures are gaining ground in the premarket trading session after the release of these reports, and the market looks ready to continue the upside trend.

Fed’s Bullard Believes That Unemployment Rate Will Materially Decline By The End Of The Year

Despite the recent surge in the number of new coronavirus cases in the U.S., St. Louis Fed President James Bullard thinks that Unemployment Rate will decline to 7 – 8% by the end of this year.

This optimism is based on the current momentum since Unemployment Rate has declined from 14.7% in April to 11.1% in June. Back in February, when the economy did not suffer from the coronavirus pandemic, Unemployment Rate was just 3.5%.

The road to such levels may be a long one, but a return to Unemployment Rate of 7 – 8% will be a major move forward for the U.S. economy.

Such projections from Fed officials provide additional support to stocks which continue to ignore worrisome news on the coronavirus front.

Oil Continues To Trade In a Very Tight Range Near The $40 Level

Oil stays above the $40 level for the sixth session in a row but fails to get above the $41 level. Such a tight range is highly unusual for a volatile commodity like oil.

Meanwhile, major oil stocks like Exxon Mobil, Chevron or BP are slowly trending down in absence of additional upside catalysts.

In my opinion, the quiet trading in oil cannot last much longer so oil will be ready to break out of the coming range in the upcoming trading sessions, with the corresponding impact on oil-related stocks.

For a look at all of today’s economic events, check out our economic calendar.

Wall Street Gains after Overcoming Mid-Session Weakness

The major U.S. stock indexes closed slightly higher in choppy trading on Wednesday, once again supported by technology shares as early signs of an economic rebound offset concern about further lockdowns due to a jump in coronavirus cases across the country.

In the cash market, the benchmark S&P 500 Index settled at 3169.94, up 24.62 or +0.82%. The blue chip Dow Jones Industrial Average finished at 26067.28, up 177.10 or +0.70% and the technology-based NASDAQ Composite closed at 10492.50, up 148.61 or 1.57%.

Quick Recap

The markets opened under pressure early Wednesday as investors stayed on the sidelines in the face of an alarming rise in coronavirus caseloads across the country that poses a risk to a recovery in business activity. However, new buying came in shortly after the opening to turn stocks higher as we approached the mid-session.

Stocks gave back those earlier gains and turned lower for the session shortly before 16:00 GMT after a senior Fed official said the central bank may slow the pace of its corporate bond purchases. This news spooked traders because the announcement by the Fed on March 23 that it would start buying corporate debt helped put in the bottom of the stock market.

Investors Rattled after Fed Official Said Central Bank May Slow Pace of Corporate Bond Purchases

According to Dow Jones Newswires that broke the story, “A senior official at the New York Federal Reserve said the U.S. central bank could slow its pace of corporate debt purchases if financial markets continued to improve.”

Daleep Singh, head of the New York Fed’s markets group, noted the functioning of corporate credit markets had strengthened since the Fed unrolled its emergency lending backstops. Still, Singh said the central bank stood ready to tweak its approach given the uncertainty around a potential wave of bankruptcies from the economic impact of the coronavirus.

The reaction in the markets was swift especially by sellers who recognize we wouldn’t have a recovery in the stock market if it weren’t for the Fed’s swift interventions that helped stabilize the financial markets.

Singh went on to insure investors that a slowing in purchases “would not be a signal that the SMCCF’s (the Fed’s corporate purchase plan) doors were closed, but rather that markets are functioning well. Should conditions deteriorate, purchases would increase.”

Corporate News

Biogen Inc jumped 6.9% in premarket trading after the company said it submitted the marketing application for its experimental Alzheimer’s disease therapy, aducanumab, to the U.S. Food and Drug Administration.

Allstate Corp slipped 2.6% as the U.S. insurer said it would buy National General Holdings Corp for about $4 billion in cash, scaling up its auto insurance business at a time when the coronavirus has crushed traffic on roads and reduced claims.

Levi Strauss & Co fell about 5% as the denim apparel maker cautioned its business would be hit in the second half of the year, even as its sales have been improving at its reopened stores.

For a look at all of today’s economic events, check out our economic calendar.

Ford Motor’s China Vehicle Sales Rebound 3% in June Quarter as Coronavirus Restrictions Ease

Ford Motor Co, an American multinational automaker, said that its vehicle sales in mainland China rebounded in the June quarter, growing 3% from the same period last year, driven by strong demand following the lifting of COVID-19 pandemic restrictions.

That would be the first time in nearly three years, the automaker has registered a rise in quarterly sales. Total of 158,589 vehicles were sold during the second quarter, representing a 3% growth year-over-year and 78.7% sales increase compared to the first quarter of 2020.

Transit commercial vehicles experienced solid y/y growth of 60.9%, as did Lincoln luxury vehicles on gains of 12.0%, the company said. In the U.S., where business has been hit hard by the coronavirus pandemic, Ford’s sales fell more than 30% during the quarter.

On the other hand, Ford’s rival, General Motors’ sales declined 5.3% during the quarter in the world’s second-largest economy. Ford’s sales plunged 26% in 2019 and 37% in 2018.

Ford outlook and price target

Eleven analysts forecast the average price in 12 months at $6.24 with a high forecast of $8.00 and a low forecast of $3.50. The average price target represents a 2.46% increase from the last price of $6.09. From that eleven, three analysts rated ‘Buy’, six rated ‘Hold’ and two rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $8 with a high of $12 under a bull scenario and $4 under the worst-case scenario. Ford Motor had its price target lifted by UBS Group from $4.30 to $6.70. UBS Group currently has a neutral rating on the auto manufacturer’s stock. JP Morgan raised the target price to $7 from $6. Ford Motor was given a $7.50 price target by analysts at Jefferies Financial Group Inc. The firm currently has a buy rating on the stock.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

Analyst view

“We raise our 2020 Ford EPS forecast to ($0.90) vs. our prior forecast of ($1.30), while for 2021 and 2022 our EPS rises to positive $0.75 and $1.25 vs. our prior forecast of $0.30 and $0.80 respectively. On our revised price target of $8, Ford trades at just over 10x our 2021E EPS. Currently, the stock trades at just over 9x our revised 2021 EPS forecast,” Adam Jonas, equity analyst at Morgan Stanley noted in June.

“We raise our 3Q N. American Ford volume forecast to negative 12% Y/Y vs. down 15% previously. Our 4Q volume is revised to down 3% vs. down 5% previously. This slight upward adjustment reflects stronger than expected US SAAR, a rebound in used vehicle prices, and more supportive auto credit vs. our prior forecasts,” he added.

European Equities: Economic Data and COVID-19 to Test the Majors

Economic Calendar:

Thursday, 9th July

German Trade Balance (May)

The Majors

It was another bearish for the European majors on Wednesday, with no stats or positive news to shift the mood from Tuesday. The CAC40 fell by 1.24%, with the DAX30 and EuroStoxx600 declining by 0.97% and 0.67% respectively.

Rising COVID-19 cases across the U.S drew more attention than normal, as the number of cases rose to beyond 3m.

Reuters also published an article reporting that the WHO acknowledged “evidence emerging” of the airborne spread of the virus.

The accelerating spread of the virus brings into question the market’s optimistic outlook on economic recovery. All of this before earnings season kicks in next week…

The Stats

It was a particularly quiet day on the Eurozone economic calendar on Wednesday. There were no material stats to provide the European majors with direction.

From the U.S

It was also quiet through the U.S session, with no major stats from the U.S to shift sentiment late in the day.

The Market Movers

For the DAX: It was another mixed day for the auto sector on Wednesday. Continental slid by 2.54% to lead the way down. Daimler and Volkswagen saw more modest losses of 0.52% and 0.86% respectively, while BMW bucked the trend, with a 0.41% gain.

It was also another mixed day for the banks. Deutsche Bank rose by 0.89%, while Commerzbank slipped by 0.94%.

WIRECARD AG slid by 15.53% to partially reverse a 32.51% gain from Tuesday.

From the CAC, it was a bearish day for the banks. BNP Paribas and Soc Gen fell by 2.39% and 2.23% to lead the way down. Credit Agricole ended the day with a 1.42% loss.

The French auto sector struggled after a bullish start to the week. Peugeot and Renault slid by 4.20% and by 4.61% respectively.

Air France-KLM and Airbus SE fell by 2.21% and by 2.18% respectively, following on from a pullback on Tuesday.

On the VIX Index

A run of 2 consecutive days in the green came to an end for the VIX on Wednesday. Partially reversing a 5.33% gain from Tuesday, the VIX fell by 4.59% to end the day at 28.08.

After a bearish start to the day, the major U.S indexes bounced back to wrap up the day in positive territory.

Hope overshadowed the dire COVID-19 numbers from the U.S on the day, with no economic data to influence. Tech stocks led the way, delivering the NASDAQ with a solid gain on the day.

The S&P500 rose by 0.78%, with the Dow and NASDAQ ended the day with gains of 0.68% and 1.44% respectively.

VIX 09/07/20 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone economic calendar. May’s trade figures for Germany are due out later this morning.

We won’t expect too much influence from the numbers, however, which are now dated.

With the stats unlikely to garner too much attention, expect updates on Brexit and COVID-19 news to remain key drivers.

From the U.S

It’s also a relatively quiet day on the economic calendar, though we do expect the weekly jobless claims to influence.

Following a record jump in nonfarm payrolls in June, we have yet to see the weekly claims fall back to sub-1m levels.

With a number of the most populous U.S states hitting pause on reopening, this week’s figures could be alarming…

Anything under 1m initial jobless claims and the markets may breathe a sigh of relief.

The Latest Coronavirus Figures

On Wednesday, the number of new coronavirus cases rose by 222,368 to 12,130,571. On Tuesday, the number of new cases had risen by 227,176. The daily increase was lower than Tuesday’s rise while higher than 210,499 new cases from the previous Wednesday.

Germany, Italy, and Spain reported 986 new cases on Wednesday, which was up from 776 new cases on Tuesday. On the previous Wednesday, 1,062 new cases had been reported.

From the U.S, the total number of cases rose by 62,416 to 3,162,416 on Wednesday. On Tuesday, the total number of cases had increased by 67,655. On Wednesday, 1st July, a total of 51,607 new cases had been reported.

The Futures

In the futures markets, at the time of writing, the DAX was up by 127 points, while the Dow was down by 28 points.

For a look at all of today’s economic events, check out our economic calendar.

Mid-Week Themes – The Economic Recovery, Geopolitics, and Brexit News in Focus

The second week of July and the quarter is in the middle. Throughout the end of last week and this week, various economic data has been released.

What does the published data reveal to us?

Economic data over the last week or two have certainly supported the market optimism of an economic rebound.

We’ve seen nonfarm payrolls from the U.S surge by record levels. And we have seen PMIs, retail sales, and industrial production recover.

It’s worth noting, however, that these are coming back from record lows. So, while the figures are supportive of even a V-shaped recovery, July numbers will need to maintain that upward trend.

When you see governments having to reintroduce confinement measures as a result of COVID-19 spikes that recovery could be tested. All in all, this will make the next round of economic indicators all the more relevant and influential. Expect plenty of sensitivity to the next set of numbers.

The markets are still bound to watch out for a return of the coronavirus.

In the meantime, are there any notable geopolitical developments occurring?

While Brexit remains a headline, the U.S and China tensions remain the biggest threat. We saw the U.S send two aircraft carriers into the South China Sea while China carried at war drills.

Since then, however, it’s been relatively quiet. The U.S has dragged the UK into the spat, however. Britain riled Beijing over plans to pull out of the Huawei deal. To top things off, offering 3m Hong Kong citizens with UK citizenship didn’t go down too well either…

Ironically, the U.S has asked China to ramp up imports in spite of the latest spat. That suggests that it’s nothing more than arm flexing for now, though things could deteriorate…

The US elections are bound to grow in importance, as their impact on the markets grows.

Meanwhile, Brexit news is off the news wires. Are there any developments in the process?

Following last week’s curtailed talks, Brexit talks are set to resume today after last night’s dinner in Downing Street.

The key to any deal remains EU access to UK fisheries. From an EU perspective, it is clear. No agreement on fisheries means no trade agreement.

News had hit the wires early in the week that the EU was willing to compromise, which delivered Pound support.

How much of a compromise they are willing to make remains to be seen, however…

There is the talk of a zonal attachment. This is where access to fish is based on the amount of time it spends in British waters. Scientific data would then provide the allotments…

All of this has stemmed from climate change. Britain’s waters are warmer and the fish want warmer water. EU fishermen, however, still want access to the fish.

Expect updates over the next couple of days to materially influence the Pound. Any agreement and the Pound should rocket.

US Stock Market Overview – Stocks Rally Led by the Nasdaq Which Notched Up another Record High

US stocks moved higher with the Nasdaq hitting a fresh all-time high. This is the 28th all-time high for the Nasdaq in 2020. Sectors in the S&P 500 index were mixed, led by financial and cyclical, while materials were the worst-performing sector. James Bullard was on the tape as one of the Fed officials talking to CNBC saying that he believes that the unemployment rate will hit single digits by the end of the year. Currently, the US unemployment rate is 11.4%. United Airlines announced that it might be forced to lay off half its workforce by October due to the lack of travel driven by the spread of COVID. The dollar moved lower on Wednesday helping to buoy gold and gold miners. Oil prices also moved higher but failed to lift the energy space.

United Announces Possible Layoffs

United Airlines announced on Wednesday that the company could be forced to shed almost half its U.S. workforce, telling 36,000 employees that they could be furloughed at the beginning of the Q4. The lack of travel in the US due to the pandemic has curtailed passenger demand. Chicago-based United is the first major U.S. carrier to detail possible mass furloughs despite the billions of dollars in federal aid provided to airlines.

Fed Governors have Mixed Views

Cleveland Federal Reserve President Loretta Mester said that her region was experiencing slowing growth due to rising coronavirus cases, and she sees more policy help necessary to help the economy through the pandemic. Mester reiterated her colleague Atlanta counterpart, Raphael Bostic, who also said he sees a rougher road to recovery. This compared to James Bullard’s take on the economy which is very constructive as he sees the unemployment rate dipping into single digits by the end of the year despite the continuous spread of COVID.

Global Economic Outlook 2020 Update: Gradual and Uneven Global Recovery; Significant Risks Still on Horizon

Download Scope’s Q3 2020 Sovereign Update (report)

Scope Ratings’ latest baseline scenario embeds a renewed increase in Covid-19 infections in the second half of 2020 in advanced economies, but one that is “manageable” in most such nations. Renewed virus transmission does not halt economic recovery but forces it onto a more gradual and uneven trajectory.

Only a selective second round of economic restrictions is imposed; more intensive in countries such as the United States or the United Kingdom. This scenario is similar to a check mark- or wing-shaped global recovery with a decelerating recovery slope after the speedy pick-up in activity of recent months.

“The implications of this crisis more broadly for the creditworthiness of sovereign states link significantly to the activation of monetary and fiscal policy responses,” said Dr Giacomo Barisone, head of sovereign ratings at Scope Ratings. “These raise debt ratios longer term, could increase moral hazard and weaken government balance sheets. Higher unemployment, non-performing loan ratios and private sector default instances weaken private and banking sector resiliencies – especially under our stressed scenario.”

“However, central bank actions continue to transfer a significant share of new public debt to monetary authorities – momentarily at least easing the scale of sovereign liquidity or solvency risk from the standpoint of private sector creditors,” Barisone says. “Weakened reserve coverage ratios and FX instability are additional risks to emerging market issuers.”

Sharp 2020 contractions globally; 2021 recovery speeds vary

Under the rating agency’s baseline economic scenario, the euro area (EA) economy contracts sharply – by 9.1% in 2020, led by deep recessions in Spain (-12.5%), France (-11.0%) and Italy (-10.0%), with a more moderate growth decline in Germany (-5.5%). Of the four largest euro area member economies, expected 2021 recoveries range from 3.2% in Germany to 7.5% with Italy.

The UK, the US and Japan also see significant contractions in activity in 2020 (-10.4%, -7.5% and -6.0%, respectively), with recoveries of 8.8%, 6.0% and 3.0% in 2021. China sees its weakest economic growth since 1976 of 1.3% in 2020, while Russia’s and Turkey’s economies contract by 6.8% and 4.2% respectively.

A stressed scenario assumes fresh lockdown in H2 2020

In a stressed scenario, there is a second round of coronavirus cases and non-essential economic activity in Europe and the US by Q3 or Q4 2020, forcing countries to reimpose highly disruptive full or partial lockdowns – leading to a double-dip economic contraction extending into prolonged economic weaknesses in 2021.

This stressed case is akin to a W-shaped recovery with, on top, severely weakened economic conditions in 2021. The stressed scenario sees global growth contract by 7.3%, with the EA seeing growth decline by 12.7% and the US by 12%. China experiences near zero growth. Under the stressed scenario, 2021 economic recoveries are more moderate.

“There is both upside and downside risk to Scope’s economic baseline, however,” said Barisone. “A more robust-than-anticipated release of pent-up demand supported by extraordinary fiscal and monetary stimulus and/or better than anticipated Q2 2020 GDP could present upside growth potential. Conversely, downside growth risks include those under the stressed case or any reversal in inflated global asset markets, crystallisation of corporate debt risks or intensification of global trade tensions.”

For a look at all of today’s economic events, check out our economic calendar.

Giacomo Barisone is Managing Director in Public Finance at Scope Ratings GmbH.

Levi’s Outlook for Revenue Growth And Margin Opportunities Appear Intact: Morgan Stanley

Levi Strauss & Co, an American clothing company known worldwide for its Levi’s brand of denim jeans, warned after its net revenue plunged over 60% in the second quarter that the effect of the coronavirus would negatively impact their businesses even in the second half of this year.

Net revenue declined 62% to $497.5 million, largely due to the temporary closure of company-operated, franchise and wholesale customer retail locations as a result of the COVID-19 pandemic, partially offset by the company’s e-commerce business which grew 25% for the quarter, with sequential month-over-month acceleration to nearly 80% growth for May, the company said.

The company recorded a net loss for the quarter of $364 million and an adjusted net loss of $192 million. Gross margin decreased 19.2 percentage points on a reported basis to 34.1%. Adjusted EBIT was a loss of $206 million.

The company also said that it would reduce our non-retail, non-manufacturing workforce by about 700 positions, or roughly 15%, which we expect will generate annualized savings of $100 million.

“Below-expectation 2Q20 results and challenging 2H20 likely pressure the stock near-term. However, e-commerce acceleration and expense cutting initiatives leave us constructive on Levi’s long-term margin story. Raise price target $1 to $18; remain equal-weight (EW),” Kimberly C Greenberger, equity analyst at Morgan Stanley noted.

“The company is in early innings as it executes its LT growth strategy and navigates softer U.S. wholesale. Levi’s experienced senior management team has proven it can deliver results. DTC, international, and underpenetrated category growth all present runways for revenue growth. Gross margin is the likely driver of EBIT margin expansion, though we do not expect further SG&A deleverage. Levi’s strong balance sheet and FCF growth should allow it to increase share buybacks and/or engage in potential organic M&A,” the analyst added.

While Levi has not yet re-closed any retail doors, the company closely monitors coronavirus trends for signals that may prompt re-closing. At this time, management indicates 40 doors are in areas of worsening virus trends. Even if stores do not re-close, deteriorating virus trends may dissuade consumers from shopping in-store – a potential headwind to expected 3Q revenue performance, Morgan Stanley noted

Morgan Stanley target price is $18 with a high of $25 under a bull scenario and $6 under the worst-case scenario. However, Telsey Advisory Group lowered its target price to $17 from $20 and UBS cuts price target to $25 from $27.

Three analysts forecast the average price in 12 months at $20.50 with a high forecast of $25.00 and a low forecast of $16.00. The average price target represents a 48.23% increase from the last price of $13.83. All those three analysts rated ‘Buy’, none rated ‘Hold’ or ‘Sell’, according to Tipranks.

However, we expect it is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

U.S. Stocks Mixed After Yesterday’s Sell-Off

U.S. Crosses The 3 Million Confirmed Cases Mark

The coronavirus situation shows no signs of improvement as the U.S. has just crossed the 3 million confirmed cases mark while a number of states reported record daily increases in the number of coronavirus cases.

These states include the populous and economically important California and Texas. Yesterday, virus worries led to a sell-off closer to the end of the trading session.

Today, traders stay reasonably optimistic and bet that serious virus containment measures will not be implemented. The world markets are rather nervous but there is no sell-off.

With no important economic reports scheduled to be released today, S&P 500 futures are swinging back and forth in the premarket trading session and stay mostly unchanged.

Gold Gets Above $1800

The rally in gold continues. Previously, gold futures have tested the $1800 level but spot gold settled below this psychologically important level. Today, spot gold has gained more upside momentum and managed to get above $1800 per ounce.

This is a major development for gold mining stocks, many of which continue to trade below their highs reached back in May. I’d expect to see an influx of new money into the segment which will provide material support to gold-related equities.

The fundamental setup is very favorable for gold, and all-time high levels that were reached back in 2011 are now in sight. In my opinion, gold has decent chances to test the $1900 level due to problems on the virus front and rampant money-printing from the world central banks.

Oil Manages To Stay Above $40 Despite The Increase In Inventories

API Crude Oil Stock Change report showed that crude inventories have increased by 2.05 million barrels in a week. Meanwhile, gasoline inventories declined by 1.83 million barrels while distillate fuel inventories declined by 0.85 million barrels.

This report was not very optimistic for the oil market since we are in the middle of driving season and inventories should decline more aggressively given the implementation of production cuts.

However, oil managed to stay above the $40 level which indicates the strength of the current bullish trend. Today, this trend will be tested by the EIA Weekly Petroleum Status report which will provide estimates of inventories and U.S. domestic oil production.

For a look at all of today’s economic events, check out our economic calendar.

COVID-19 Cases Hit 3m in the U.S and the Numbers Are Set to Continue Rising

In the U.S, a new milestone of 3m infections was hit in the battle against the COVID-19 pandemic.

There has been nothing positive on the news wires for some time in relation to the coronavirus.

While there had been the hope of an effective vaccine, the virus appears to have more havoc to wreak on the U.S and the global economy.

The U.S in Contrast

At the time of writing, the total number of COVID-19 cases in the U.S sits at 3,097,538. According to Tuesday’s figures, the U.S accounted for more than a quarter of the world’s total number of infected.

Not only has the U.S been most severely affected but also has recorded the largest number of COVID-19 related deaths. As of Tuesday, the U.S had recorded 133,991 COVID-19 related deaths.

To put this into perspective, Brazil has the 2nd largest number of infections at 1,674,655. Brazil also has the 2nd largest number of COVID-19 related deaths, currently standing at 66,868.

To make a stark comparison, the percentage of the U.S population infected stands at 9.4%, while just 0.8% of Brazil’s population has been infected.

When looking at the mortality rate, the U.S mortality rate sits at 4.3%, versus Brazil’s 4.0%.

These figures ultimately reflect the success of the respective governments in curbing the spread of the virus.

The Administration and the Polls

Trump’s decision to push U.S states to begin reopening will be considered a grave mistake by many.

For the U.S administration, an about-turn on the reopening of the U.S economy could end Trump’s chances for office.

Looking at the FT’s interactive Calculator and polling data, Biden still looks set for an easy win in November. He has seen his share of the electorate college vote slip marginally, however.

It remains to be seen whether that slippage was as a result of the record rise in nonfarm payrolls in June. The good news for Biden and bad news for Trump, however, is that Trump’s share remains at 148 Electoral College votes.

The number of Electoral College votes that are now up for grabs has risen from 72 to 109. As was the case at the start of the month, even if Trump takes all 109, he would still fall short of the 270 needed to win.

These latest numbers are as at 6th July.

COVID-19 and the Global Financial Markets

Following a bullish start to the week, we’ve seen the appetite for riskier assets wane on Tuesday and Wednesday.

Economic indicators have continued to support a speedier economic recovery than initially expected.

The increased spread of the coronavirus will likely slow the pace of the recovery, however. For the markets, the only uncertainty is to what extent the recovery will slow.

One economic indicator that has continued to flash red amidst all the hype has been the U.S weekly jobless claims.

These figures have continued to reflect dire labor market conditions and have shown little sign of falling to pre-pandemic levels.

A continued upward trend in COVID-19 cases across the U.S will likely lead to a rise in these weekly claims. Lag or no lag, we have not seen sub-1m levels since 281,000 claims back in the week ending 13th March.

Can the markets pallet another 1.4m jump amidst the accelerated spread of the virus?

We can expect plenty of market sensitivity to tomorrow’s figures. More alarmingly, is news of the WHO reportedly acknowledging that there is evidence emerging of the airborne transmission of the virus.

Airborne transmission coupled with the continued reopening of the U.S economy does not bode well.

In reality, however, we have yet to see the global financial markets shudder at the prospects of a full-blown 2nd wave.

At some point, this may change, particularly if U.S State governors rebel and shut down the most populous U.S states.

According to Reuters, California, Hawaii, Idaho, Missouri, Montana, Oklahoma, and Texas, all reported new record highs on Tuesday.

The two largest U.S states, California and Texas reported more than 10,000 new cases each on Tuesday.

Importantly, the numbers have also shown that there has been no summertime decline in transmission.