European Equities: Service Sector PMIs and Brexit in Focus

Economic Calendar:

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a mixed day for the European majors on Wednesday, following Monday’s gains. The DAX30 and EuroStoxx600 fell by 0.52% and by 0.05% respectively, while the CAC40 ended the day up by 0.02%.

For the majors, concerns over a lack of progress towards Brexit pegged the majors back on the day. Also weighing on the majors and the DAX30, in particular, was news that the Democrats would retain the phase 1 trade agreement with China near-term.

There were positives, however, that provided support. News of the UK approving the BioNTech/Pfizer.inc vaccine delivered support, as did Joe Biden talk of a COVID-19 stimulus package.

According to reports on Wednesday, the President-Elect stated that delivering a COVID-19 stimulus package was an immediate priority.

The Stats

It was a relatively busy day on the Eurozone economic calendar. German retail sales figures for October were in focus going into the European open.

According to Destatis, retail sales rose by 2.6% in October, reversing a 1.9% slide in September. Economists had forecast a 1.2% rise.

  • Compared with the same month a year ago, retail sales were up by 8.2%.
  • Supermarket, self-service department shops, and hypermarket sales were up by 7.9%, year-on-year.
  • In the non-food retail sector, sales rose by 9.0%.
  • When compared with February 2020, the pre-COVID-19 pandemic month, retail sales rose by 5.9%.

Unemployment numbers from Spain and the Eurozone released later in the day had a muted impact on the majors.

In Spain, the unemployment rose by 25.3k in September, following a 49.6k jump in August.

For the Eurozone, the unemployment rate slipped from an upwardly revised 8.5% to 8.4% in October. Economists had forecast an unemployment rate of 8.4%.

According to Eurostat,

  • While down from 8.5% in September, unemployment was up from 7.4% in October 2019.
  • Compared with September 2020, Eurostat estimates that the number of unemployed persons fell by 91,000.
  • By contrast, however, the number of unemployed persons increased by 2.186 million when compared with October 2019.

From the U.S

ADP non-farm employment change figures were in focus late in the day.

In November, nonfarm employment increased by 307k, falling short of a forecasted 410k increase. In October, nonfarm employment had increased by 365k.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. Continental slid by 1.56%, with BMW and Volkswagen falling by 0.39% and by 0.44% respectively. Daimler rose by 0.24%, however, to buck the trend on the day.

It was a bullish day for the banks. Deutsche Bank rose by 0.90%, with Commerzbank ending the day up by 1.81%.

From the CAC, it was a bullish day for the banks. BNP Paribas and Credit Agricole rose by 1.69% and by 1.67% respectively, with Soc Gen gaining 2.10%.

It was a mixed day for the French auto sector, however. Peugeot fell by 0.79%, while Renault rose by 1.45%.

Air France-KLM slipped by 0.85%, while Airbus SE rose by 2.15%, following Tuesday’s 1.90% gain.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX, after having fallen for 5 consecutive days. Following on from Tuesday’s 0.97% gain, the VIX rose by 1.93% to end the day at 21.17.

Disappointing ADP nonfarm figures had limited impact, while plans to retain the phase 1 trade agreement with China was market negative. On the positive, however, remained progress towards a COVID-19 vaccine and hopes of a stimulus package to support the U.S economy.

For the U.S markets, it was a mixed day after Tuesday’s gains and last month’s rally. The Dow and S&P500 rose by 0.20% and by 0.18% respectively, while the NASDAQ slipped by 0.05%.

VIX 031220 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include services and composite PMI numbers for Italy and Eurozone retail sales figures.

Finalized services and composite PMI figures for November are also due out for France, Germany, and the Eurozone.

We would expect the Eurozone’s composite and services PMI to have the greatest impact on the majors.

From the U.S, the all-important ISM services PMI and weekly jobless claims figures will also influence later in the day.

Away from the economic calendar, Brexit and COVID-19 news updates will need monitoring. Any further chatter on a stimulus package from Capitol Hill would influence.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 18 points.

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

COVID-19 Vaccine Update – The UK Wastes No Time as MHRA Approves Vaccine

The Latest

BioNTech and Pfizer Inc. became the first pharma to have their mRNA COVID-19 vaccine approved on Wednesday.

The UK’s Medical & Healthcare Products Regulatory Agency (“MHRA”) became the first agency to approve a COVID-19 vaccine.

With the UK suffering at the hands of the COVID-19 pandemic, the independent regulator wasted little time.

The UK Government has pre-ordered 145 million doses of COVID-19 vaccines from Pfizer Inc., Moderna Inc., and AstraZeneca. Of the 145 million doses, the government has pre-ordered 40 million from BioNTech/Pfizer Inc.

With an efficacy rate of 95% and effective across all age groups, the first doses of the vaccine are due to arrive in days.

The UK Government announced that a first batch of 800,000 doses forms part of an expected 10 million doses by the end of the year.

With the vaccine coming in 2 doses, 5 million patients will receive inoculation if BioNTech/Pfizer Inc. delivers the full quota.

The Government’s Joint Committee on Vaccination and Immunisation (“JCVI”) affirmed on Wednesday that the first priorities should be the prevention of COVID-19 mortality and the protection of health and social care staff and systems.

The JVIC has given older adult residents in care homes the highest priority for vaccination, followed by care home workers.

Secondary priorities could include vaccination of those at increased risk of hospitalization and at an increased risk of exposure.

Logistics will now need to be in place to transport the vaccine, at -70C, for administration across the UK.

How the Markets Reacted

The FTSE100 rose by 1.23% on Wednesday, with the upside coming off the back of the MHRA announcement.

For the European majors, while it was a mixed day, the DAX30 and CAC40 came off lows in response to the news.

BioNTech SE share price rose by 6.21% in response to the news. Pfizer Inc. ended the day up by a more modest 3.51%.

While trailing Pfizer Inc. in the race to deliver a global vaccine, there was also support for AstraZeneca and Moderna Inc., which rose by 1.26% and by 1.41% respectively.

What’s next?

With UK regulators beating the FDA and the EU’s European Medicines Agency (“EMA”) to the punch, BioNTech/Pfizer Inc. will now need to deliver the doses.

There’s no trial run for BioNTech/Pfizer Inc. in terms of delivering the doses in a timely manner.

Both BioNTech/Pfizer Inc. and the government will likely face logistical challenges and the markets and governments from overseas will likely watch closely.

Successful distribution and administration of the first batch are now key. For the FDA and the EMA, both will have the benefit of the UK government’s experiences in distribution and vaccination.

The FDA is set to review the BioNTech/Pfizer Inc. vaccine on 10th December. In the New Year, the EMA review is due on 12th January.

Key areas of focus in the coming weeks will be production and distribution and geographical allocation.

The EU has pre-ordered 300 million doses of the BioNTech/Pfizer Inc. vaccine, with the U.S pre-ordering 100 million and an option for an additional 500 million doses.

BioNTech/Pfizer Inc. has projected between 5 million to 50 million doses to be available by the end of the year.

The UK is due to receive 10 million doses, which leaves 40 million assuming that 50 million doses are produced.

With the EU review of the vaccine not due until mid-January, that leaves the U.S and Japan in focus. While the U.S has pre-ordered 100 million, Japan has pre-ordered 120 million of the BioNTech/Pfizer Inc. vaccine.

Pressure may mount on the likes of the EMA to bring forward vaccine reviews. BioNTech/Pfizer Inc. may also feel increased pressure to deliver on the higher side of production forecasts…

US Stock Market Overview – Stock Rise Led By Energy; ADP Payrolls Disappoint

US stocks rose on Thursday following news that House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer had urged Senate Majority Leader Mitch McConnell to use a $908 billion bipartisan stimulus plan as the basis for relief talks before the end of the year. Sectors in the S&P 500 index were mixed, led higher by energy shares, consumer staples bucked the trend. News before the opening bell that the UK had approved the Pfizer vaccine, helped buoy stock prices. Mortgage applications in the US jumped more than expected while ADP private payrolls disappointed.

Mortgage Applications Rise

Mortgage applications to purchase a home jumped 9% last week from the previous week, according to the Mortgage Bankers Association’s index. Purchase applications were a robust 28% higher from a year ago.

ADP Private Payrolls Rise Less than Expected

Private companies added 307,000 jobs in November below the 475,000 expected. The October figure was revised higher to 404,000. This was the smallest gain since July’s 216,000. The revision added 39,000 to the original estimate from October, making the November miss not as bad as it appears. This comes ahead of Friday’s payroll report. The Labor Department on Friday is expected to report that the economy in November added 440,000 jobs, down from the 638,000 in October. Private payrolls are estimated to grow by 590,000.

Biden Says He won’t Immediately Terminate Chinese Tariffs

President-elect Joe Biden will not immediately remove tariffs imposed by President Donald Trump on China. Biden said he first wants to conduct a full review of the “phase one” trade deal that the Trump administration reached with China before he makes any decision on the future direction of trade with the worlds second largest economy.

US Stock Market Overview – Stock Rise Led by Financials; ISM Disappoints

US stocks started the last month of the year on a positive note, with the Nasdaq hitting an all-time high. All sectors in the S&P 500 index were higher, led by financials, industrials were the worst-performing sector in the S&P 500 index. Pfizer and Moderna on Tuesday applied for vaccine approval in the EU. The Nasdaq announced that it would require in the future that all companies listed had at least one woman and one minority on the board of directors. US ISM Manufacturing came in softer than expected with a dip into contraction territory for employment. The dollar continued to tumble hitting a 2.5-year low.

Pfizer and Moderna Apply for Vaccine Approval in the EU

Pfizer Inc. and U.S. drugmaker Moderna Inc. both applied for their coronavirus vaccines to be approved in the European Union. The announcement brings hope that the EU will soon be able to start vaccinating its 448 million people against a disease.

The Nasdaq Focusses on Diversity and Inclusion

The Nasdaq Inc. will move to require listed companies to include women and people of diverse racial identities or sexual orientation on their boards. Approximately 75% of the companies listed on the Nasdaq will be impacted by this requirement. The exchange operator filed a proposal with the Securities and Exchange Commission that would require listed companies to have at least one woman on their boards, in addition to a director who is a minority or one who is lesbian, gay, bisexual, or transgender.

ISM is Softer than Expected as Employment Drops

Institute for Supply Management reported that its manufacturing index fell to 57.5% in November from a 21-month high of 59.3% in the prior month. Expectations had been for the index to decline to 58%. While the overall number remains robust, the employment component was worrisome. The Employment Index returned to contraction territory at 48.4 percent, 4.8 percentage points down from the October reading of 53.2 percent. The New Orders Index registered 65.1 percent, down 2.8 percentage points from the October reading of 67.9 percent according to the ISM. The Prices paid Index registered 65.4 percent, down 0.1 percentage point compared to the October reading of 65.5 percent. The New Export Orders Index registered 57.8 percent, an increase of 2.1 percentage points compared to the October reading of 55.7 percent.

Veeva Systems Shares Plunge Despite Strong Q3 Earnings; Target Price $301

Veeva Systems, an American cloud-computing company focused on pharmaceutical and life sciences industry applications, reported better-than-expected earnings in the third quarter of the fiscal year 2021 and forecasts revenue between $1,446-$1,448 million for the next fiscal.

Despite that Veeva Systems’ shares plunged about 10% to $257.47 in pre-market trading on Wednesday. However, the stock is up over 100% so far this year.

The cloud-computing company reported revenues of $377.5 million in the third quarter, beating the Wall Street consensus of $362 million, up from $280.9 million one year ago, an increase of 34% year-over-year. Subscription services revenues for the third quarter were $302.9 million, up from $226.8 million one year ago, an increase of 34% year-over-year.

For the third quarter, fully diluted net income per share was $0.60, compared to $0.52 one year ago, while non-GAAP fully diluted net income per share was $0.78, compared to $0.60 one year ago. That was higher than the market expectations of $0.68.

“Veeva reported a beat-and-raise F3Q with strength across all areas of the business. Guidance for F4Q and FY22 came in above consensus and looks conservative, especially as initial FY22 revenue guidance calls for a deceleration to 19% Y/Y growth. FY22 non-GAAP operating margin guidance reflects Veeva investing more in newer growth drivers, such as Data Cloud and MyVeeva, which we view as the right move. We maintain our BUY rating and $325 price target on Veeva Systems Inc,” said Rishi N. Jaluria, Senior Research Analyst at D.A. Davidson & Company.

Veeva Systems Stock Price Forecast

Seven equity analysts forecast the average price in 12 months at $301.71 with a high forecast of $335.00 and a low forecast of $225.00. The average price target represents a 6.16% increase from the last price of $284.20. From those seven analysts, five rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $332 with a high of $532 under a bull-case scenario and $194 under the worst-case scenario. The firm currently has an “Overweight” rating on the cloud-computing company’s stock.

“Veeva delivered 11% billings upside in Q3, doubling the typical beat, while also driving op margins to company high of 41%. First look at FY22 revenue and profitability suggests plenty of conservatism to deliver beat/raise quarters. We roll forward estimates, remain OW and increase PT to $332,” said Stan Zlotsky, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. Stifel raised their target price to $325 from $300. Needham upped the target price to $327 from $310. Raymond James increased the target price to $335 from $285. In August, Bank of America boosted their price objective to $302 from $230 and gave the stock a “buy” rating. Piper Sandler boosted their price target to $310 from $220and gave the stock an “overweight” rating.

Analyst Comments

“Veeva’s core products provide SaaS solutions for the Life Sciences industry, targeting $10B+ of spending today with potential overtime to address more of the $44B Life Sciences spend on IT, leveraging the company’s strong brand recognition and expanding its TAM into other regulated industries and use cases,” said Stan Zlotsky, equity analyst at Morgan Stanley.

“As Veeva penetrates this large TAM, we see a sustainable 17% revenue CAGR over the next 5 years. Our $332PT is based on 2.4x EV/CY25 FCF/Growth adjusted, a premium to large-cap peers, but justified given the long term FCF durability and large market opportunity,” Zlotsky added.

Upside and Downside Risks

Risks to Upside: 1) VEEV penetrates its TAM faster than expected as it gains traction outside life sciences. 2) Traction within newer products and add-ons accelerates – highlighted by Morgan Stanley.

Risks to Downside: 1) 70%+ seat penetration in CRM could limit growth while declining sales headcount in Life Sciences may be a headwind. 2) TAM may be more limited due to vertical-specific focus. 3) Increased competition on CRM by competitors such as Iqvia.

Check out FX Empire’s earnings calendar

Stocks Retreat As Traders Are Not Impressed With The Restart Of Stimulus Talks

Stimulus Negotiations Are Back Into Spotlight

U.S. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi talked about the potential stimulus package for the first time after the presidential election.

At first glance, Republicans and Democrats remain far apart. Senate leader Mitch McConnell wants to include a targeted relief bill into the $1.4 trillion funding bill for the government, but Democrats will likely oppose this proposal.

Meanwhile, a group of lawmakers unveiled a new coronavirus aid package plan worth $908 billion, which is aimed at bridging the gap between Republicans and Democrats.

It remains to be seen whether both sides are ready to reach a compromise deal. The market is not impressed, and S&P 500 futures are losing ground in premarket trading.

ADP Employment Data Disappoints

The U.S. has just released ADP Employment Change report which indicated that private businesses hired 307,000 workers in November. Analysts expected that the ADP Employment Change report will show that about 400,000 jobs were added.

The report shows that the second wave of coronavirus has started to put material pressure on the job market. Traders will soon have a chance to take a look at additional employment data. On Thursday, Initial Jobless Claims and Continuing Jobless Claims reports will be released. Analysts expect Initial Jobless Claims of 775,000 and Continuing Jobless Claims of 5.9 million.

On Friday, market’s focus will shift to Non Farm Payrolls and Unemployment Rate reports. The Non Farm Payrolls report is projected to show that the economy added 481,000 jobs in November while Unemployment Rate is expected to decline to 6.9% to 6.8%.

If these reports confirm that the recovery of the job market is slowing down, stocks may find themselves under pressure.

UK Approves Pfizer’s COVID-19 Vaccine

UK has just approved the coronavirus vaccine developed by Pfizer and BioNTech. Vaccinations are expected to begin early next week.

Not surprisingly, Pfizer and BioNTech shares are gaining ground in premarket trading.

The reaction of the broader market is muted. Perhaps, traders wait for the approval of Pfizer/BioNTech and Moderna‘s vaccines in the U.S.

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

Salesforce.com Earnings Beat Wall Street Estimates But Slack Acquisition Steals Thunder

Salesforce.com Inc, an American cloud-based software company, reported better-than-expected profit in the third quarter of the fiscal year 2021 with revenue increasing 20% year-over-year to $5.42 billion, but shares plunged over 4% in extended trading on news of Slack acquisition.

The company reported GAAP net income of $1.08 billion, or $1.15 per share, compared with a loss of $109 million, or 12 cents per share a year ago. Adjusted earnings came to $1.74 a share. That higher than the market consensus for earnings of 75 cents per share and revenue of $5.25 billion.

“Wide-moat Salesforce reported strong results, including a meaningful upside to both revenue and non-GAAP EPS, while guidance for the fourth quarter was mixed. Stealing the thunder from fine results was the formal announcement that the company is acquiring Slack, and this dominated the earnings call. We have mixed feelings on the Slack acquisition,” said Dan Romanoff, equity analyst at Morningstar.

“We are maintaining our fair value estimate of $253 for Salesforce as good organic results are offset by the seemingly modest deleterious impact on shareholder value arising from the Slack acquisition. With the recent pullback, we think Salesforce shares are looking increasingly attractive,” Romanoff added.

Salesforce’s shares closed 1.81% lower at $241.35; traded over 4% lower at $231.50 in extended trading on Tuesday. However, the stock is up about 50% so far this year.

Salesforce Stock Price Forecast

Eighteen equity analysts forecast the average price in 12 months at $291.53 with a high forecast of $325.00 and a low forecast of $234.00. The average price target represents a 20.79% increase from the last price of $241.35. From those 18 analysts, 15 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $275 with a high of $332 under a bull-case scenario and $187 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the enterprise cloud computing solutions leader’s stock. Raymond James raised their target price to $280 from $255.

Several other analysts have also upgraded their stock outlook. Salesforce.com has been given a $275 price target by The Goldman Sachs Group. The brokerage currently has a “buy” rating on the CRM provider’s stock. Bernstein restated a “neutral” rating and set a $234 price target. Barclays boosted their price target to $315 from $264 and gave the stock an “overweight” rating.

Analyst Comments

“While Salesforce.com (CRM) remains one of our best secularly positioned names given enterprise IT spend prioritized towards digital transformation, we see current valuation reflective of long-term share gains within an estimated $175 billion TAM over the next 4 years and >$200 billion longer-term,” said Keith Weiss, equity analyst at Morgan Stanley.

“We see total revenue nearly doubling by FY24, but at CRM’s current scale and market cap, an increasing focus on FCF and earnings is likely necessary for further price appreciation. Our Equal-weight view on CRM shares is based on our $275 PT, which is based on 30X our CY25e FCF per share of $12.07, discounted back at 8.5%,” Weiss added.

Upside and Downside Risks

Risks to Upside: Slack Connect becomes a powerful contributor to net new customer additions. Net dollar retention rate stabilizes as new COVID-19 customers begin to meaningfully expand – highlighted by Morgan Stanley.

Risks to Downside: Competition from Microsoft, which offers a similar product for free to Office 365 users; Difficulty expanding outside of the IT department; Organizations defer to a bundled alternative (MSFT Teams, Google Workspace) in a weaker macro.

Check out FX Empire’s earnings calendar

Brexit Update – Talks Continue as EU Member States Keep an Eye on Barnier

The Latest

Brexit talks are continuing in London, after EU chief negotiator Barnier’s arrival at the start of the week.

The hot topics of debate remain the same in spite of talks having extended for months, if not years…

UK fisheries and a level playing field remain key sticking points for Britain and the EU.

As far as UK fisheries are concerned, French President Macron continues to take an uncompromising stance. With the presidential elections next year, a loss of access to UK fisheries would be a blow to Macron’s chances.

Losing complete access, in the event of a no-deal Brexit, would be a bigger blow to French fishermen, however.

For the Brexiteers and for Britain, continuing to give the EU access to UK waters makes no sense. Leaving the EU should translate into independence and control over its waters and borders.

Interestingly, the fishing industry contributes very little to the UK economy. In fact, when compared with contribution from trade and services, UK fisheries barely feature in economic reports. The fishing industry comes under agriculture which contributes less than 1% to the UK GDP.

By contrast, the manufacturing sector contributes closer to 20%, with Services more than 70% to GDP.

Therefore, standing firm on UK fisheries at the expense of an EU-Britain trade agreement will have a material economic impact. It’s hardly surprising that Bank of England Governor Bailey viewed Brexit as the greatest threat to the UK economy…

Ceding on UK fisheries, however, is not an option Boris Johnson.

UK Sovereignty in the Spotlight

A British government compromise on UK fisheries will question the entire concept of Brexit.

Back in 2016, those in favor of leaving the EU voted in order for Britain to recapture its independence and sovereignty.

The EU continues to miss the point on this front and continues to push to keep Britain tied to as many EU laws as possible.

With Brexiteer Boris Johnson at the helm, it remains unlikely for the British PM to give up too much ground.

While French President Macron is eyeing next year’s election, Boris Johnson also needs to keep the Tories united.

The British Pound

At the time of writing, the Pound was up by 0.03% to $1.34155 against the Dollar.

GBPUSD 021220 Daily Chart

The minor gain comes off the back of a 0.82% rally back to $1.34 levels for the 1st time since June 2018. That’s quite an achievement when considering the fact that the Pound was languishing at sub-$1.20 levels in March of this year.

It’s an even greater achievement when considering the hurdles that remain for negotiators to overcome in order to reach an agreement.

With Barnier in London, the EU is reportedly set to request updates and line of sight on negotiations before any actual agreement is made.

In recent weeks, we have heard Barnier talk of a willingness to compromise. Since then, however, EU President Ursula von der Leyen and a number of heads of stats have voiced concern.

The EU President’s message was clear that Brexit should not jeopardize the integrity of the EU Single Market. Macron and a number of others would likely argue that any EU compromise on access to UK fisheries would be just that.

In reality, however, more EU member states are likely to be worse off in the event of a no-deal Brexit than those which would benefit from unaltered access to UK fisheries.

From an economic perspective, therefore, the EU should be more than willing to give up the fight on UK fisheries.

The imbalances of power across the EU continue to be highlighted and remains the Achilles Heel of the EU Project.

Brussels is desperate to keep the EU Project afloat. But whether this at any cost remains to be seen. After all, Macron could be out next year. A populist government would find it hard to argue for unaltered access. It wouldn’t be very populist.

Looking Ahead

With the markets having made taken its position on the Brexit front, it now comes down to updates from the respective negotiating teams.

In recent months, the Pound has grown resilient to the strong-arming of the EU and negative chatter across the news wires.

It is crunch time, however. Following yesterday’s move through to $1.34 levels, a deal will need to be forthcoming to support further upside and a move through to $1.40 levels.

Support from the hope of an agreement does leave the Pound exposed to material downside risks, however.

A no-deal and this year’s current low of $1.14098 would have to be a starting point.

COVID-19 Vaccine Update – Moderna Inc. Requests Approval from the FDA and the EMA

Moderna Inc.

Moderna Inc. has submitted its request to the FDA for a EUA approval. With the FDA reviewing the Pfizer Inc. vaccine on 10th December, the Moderna Inc. review will take place on 17th December.

With the race to deliver a COVID-19 vaccine to the U.S and beyond continuing, it has become a two-horse race.

Both pharmas have gone down the same road on the virology front, delivering an mRNA vaccine. Until now, no regulator has reportedly approved such a vaccine.

With COVID-19 efficacy rates of between 94% and 95%, the FDA and other regulators will likely have little choice but to approve the vaccines.

Following impressive results from Pfizer Inc. and BioNTech, Moderna Inc.’s final results were as impressive. An efficacy rate of 94.1% and 100% effectiveness in preventing severe cases of COVID-19 were well received.

Assuming that the FDA approves both vaccines, Pfizer Inc. and Moderna Inc. are likely to deliver vaccines days after the approvals.

According to the European Medicines Agency (“EMA”), it has also received applications for COVID-19 vaccines from Pfizer Inc. /BioNTech and Moderna Inc.

The Agency’s human medicines committee has scheduled extraordinary meetings to conclude the evaluations. In terms of timelines, the scientific committee for human medicines (“CHMP”) will conclude its assessment during an extraordinary meeting scheduled for 12th January at the latest.

Production Projections

Since lodging EUA requests, both have provided details on vaccine production numbers for this year and the next.

Moderna Inc. expects to have 20 million doses of the vaccine available to the U.S by the end of this year. For next year, the target is to manufacture between 500 million and 1 billion doses globally.

BioNTech/Pfizer Inc. is aiming to deliver between 5 million and 50 million doses by year-end.

Both vaccines require two doses. This means that Moderna Inc. and BioNTech/Pfizer Inc. could inoculate as many as 30 million people by year-end.

The Centers for Disease Control and Prevention

On Tuesday, the CDC is due to meet in order to deliver prioritization advice to the U.S states.

Expectations are for the CDC to prioritize health-care workers and residents of long-term care facilities.

The recommendations will come ahead of a Friday deadline for U.S states to submit vaccine distribution plans to the Federal Government.

Once phase 1a of the prioritization is complete, the CDC will then deliver further priority recommendations.

UnitedHealth Forecasts 2021 Revenue Between $277-$280 Billion; Target Price $400 in Best-Case

For this year, UnitedHealth Group expects revenues of about $257 billion, with net earnings to approach $15.90 per share and adjusted net earnings to approach $16.75 per share.

“Management previously braced investors that 2021 EPS growth would be below its long-term target of 13-16% due to COVID-19 uncertainty. The $18 starting point represents 8% growth, which is 2% below the Street. However, ex $1.80 of potential COVID-19 impact, growth would be an impressive 18%,” said David Windley, equity analyst at Jefferies.

“Other takes: 1) Positive enrollment updates: MA +13.5%, Commercial+1%; 2) Optum margins expand 45bps while Commercial declines 85bps due to COVID;3) Repurchases of $5BN vs $4.5BN in ’20,” Windley added.

At the time of writing, UnitedHealth’s shares traded 4.47% higher at $351.99 on Tuesday; the stock is up about 20% so far this year.

UnitedHealth Stock Price Forecast

Sixteen equity analysts forecast the average price in 12 months at $367.47 with a high forecast of $409.00 and a low forecast of $330.00. The average price target represents a 4.48% increase from the last price of $351.71. From those 16 analysts, 13 rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $371 with a high of $449 under a bull-case scenario and $183 under the worst-case scenario. The firm currently has an “Overweight” rating on the insurance company’s stock.

“We calculate our price target by applying a 20.5x P/E multiple to our base case FY21E EPS of $18.14. Multiple reflects 0.8 turn premium to S&P 500 multiple of 19.6x. Premium in-line with UNH 5 year average premium UNH has historically traded at the adjusted repeal of HIF (+0.4x) and for periods in 2019 where fears over M4A weighed on multiple (we don’t believe this outcome is likely),” said Ricky Goldwasser, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. UnitedHealth Group had its price target increased by equities research analysts at Piper Sandler to $409 from $385. The firm presently has an “overweight” rating on the healthcare conglomerate’s stock. SVB Leerink lifted their price target to $373 from $370 and gave the company an “outperform” rating. Credit Suisse Group boosted their target price to $395 from $355 and gave the stock an “average” rating.

Analyst Comments

“UnitedHealth Group is the number one Medicare Advantage player with 28% market share, the number two Medicare PDP player with 20% market share, and the number two commercial player with 15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” said Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in the breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the U.S. healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A,” Goldwasser added.

Upside and Downside Risks

Risks to Upside: 1) MA growth above the market. 2) Optum integration leads to industry-leading MLR performance. 3) Medicaid margins improve to target 3%-5% range – highlighted by Morgan Stanley.

Risks to Downside: 1) Regulatory uncertainty. 2) Slower growth in core growth areas such as Medicare Advantage, commercial, and Medicaid with focus on services. 3) Optum growth slows as competitors become more reluctant to work with UnitedHealth.

Stocks Set To Test New Highs

Traders Are In A Good Mood At The Beginning Of The Month

S&P 500 futures are gaining about 1% in premarket trading as stocks look ready to test new highs.

There are no special catalysts for this move, and it looks like traders continue to believe that vaccines will soon improve the economic situation.

Shares of Moderna, whose vaccine is set to be approved by FDA in December, are the main beneficiary of traders’ hopes. After gaining more than 50% in recent days, Moderna’s stock is up by almost 10% in premarket trading.

In addition to vaccine optimism, investors look forward to the new coronavirus aid package. Expectations of more money-printing have recently put material pressure on the U.S. dollar which is trading near yearly lows.

OPEC+ Postponed Its Meeting To December 3

WTI oil is swinging between gains and losses while traders struggle to evaluate OPEC+ decision to postpone the second part of its meeting from December 1 to December 3.

On the one hand, this decision shows that OPEC+ members are willing to negotiate a viable deal. On the other hand, it is obvious that OPEC+ members failed to reach common ground during the first day of the meeting, and the extension of current production cuts is under question.

Yesterday, oil-related stocks suffered a serious pullback, and they will likely have a chance to rebound during today’s trading session in case oil manages to stay above the $45 level.

PMI Reports In Focus

Today, the U.S. will release the final reading of Manufacturing PMI report for November. Analysts expect that Manufacturing PMI increased from 53.4 to 56.7. Sometimes, final readings differ materially from preliminary estimates, so this report may have a significant impact on the market.

Traders will also have a chance to take a look at ISM Manufacturing PMI report which is projected to show a decline from 59.3 in October to 58 in November. Meanwhile, Construction Spending is projected to grow by 0.8% month-over-month in October.

It remains to be seen whether stocks will be sensitive to economic data or traders will remain focused on vaccines and the potential stimulus package that could be delivered in early 2021.

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

Asia-Pacific Shares Soar on Strong China Factory Activity Growth; RBA Holds Rates Steady

The major Asia-Pacific stock indexes posted strong gains on Tuesday after taking an end-of-the-month breather the previous session. Buyers were aggressive the first day of the new month, helped by the release of a private survey of China’s manufacturing activity. The news comes on the heels of Monday’s official manufacturing PMI for November that came in at the highest reading in more than three years.

In the cash market on Tuesday, Japan’s Nikkei 225 Index settled at 26787.54, up 353.92 or 1.34%, Hong Kong’s Hang Seng Index finished at 26567.68, up 226.19 or +0.86% and South Korea’s KOSPI Index closed at 2634.25, up 42.91 or +1.66%.

In China, the Shanghai Index settled at 3451.94, up 60.18 or +1.77% and Australia’s S&P/ASX 200 Index finished at 6588.50, up 70.70 or +1.08%.

China’s Factory Activity Growth Hits Decade High in November as Economy Recovers

Activity in China’s factory sector accelerated at the fastest pace in a decade in November, a business surveyed showed on Tuesday, as the world’s second-largest economy recovers to pre-pandemic levels.

The Caixin/Markit Manufacturing Purchasing Managers’ Index PMI rose to 54.9 from October’s 53.6, with the gauge staying well above the 50-level that separates growth from contraction for the seventh consecutive month. Analysts polled by Reuters had forecast the headline reading would slip to 53.5.

The Caixin PMI reading was the highest since November 2010, and comes after an official gauge of factory activing, focusing more on larger and state-owned firms, rose at the fastest pace in over three years.

“Manufacturing continued to recover and the economy increasingly returned to normality as fallout from the domestic COVID-19 epidemic faded,” Wang Zhe, senior economist at Caixin Insight Group, wrote in a note accompanying the survey release.

RBA Holds Rates Near Historical Lows

The Reserve Bank of Australia (RBA) held rates at near-zero in a widely expected move on Tuesday as easy monetary and fiscal policies propped up the coronavirus-hit economy, fueling demand for homes and boosting construction activity.

In a short post-meeting statement, Governor Philip Lowe sounded optimistic about a recovery as the country has confidently reopened with almost zero new coronavirus cases.

“The economic recovery is under way and recent data have generally been better than expected,” Lowe said.

“This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support.”

Lowe also reiterated the board was unlikely to raise the cash rate for at least three years and was prepared to do more if necessary.

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

Zoom Earnings Beat Wall Street Estimates But Shares Dip 5% After Hours on Disappointing Margins

Zoom, a cloud video communications provider, reported better-than-expected earnings in the third quarter of the fiscal year 2021 with a revenue surge of over 365% and forecasts total revenue between $2.575-$2.580 billion in the full fiscal year.

But shares traded down 5% in the aftermarket, partially on gross margins that were light of consensus and down sequentially, driven by the high volume of free users and higher public cloud usage. Zoom’ shares closed 1.43% higher at $478.36 on Monday; the stock is up over 600% so far this year.

The company said its revenue climbed 367% to $777.2 million in the third quarter ended October 31, beating the Wall Street consensus estimate of around $694 million. Adjusted earnings came in at 99 cents per share, also beating market expectations of 76 cents per share.

Zoom forecasts revenue between $806-$811 million in the fourth quarter, above estimates of $730.1 million and non-GAAP income from operations between $243.0 million and $248.0 million. Non-GAAP diluted EPS is expected to be between $0.77 and $0.79 with nearly 306 million non-GAAP weighted average shares outstanding.

“Zoom (ZM) reported a record F3Q21, but shares traded down 5% AMC on light gross margins (partly the result of more free users). We would be buyers on a sustained pullback, as the quarter was beyond impressive, with ZM scoring a 420 on a “Rule of 40” basis,” said Rishi N. Jaluria, Senior Research Analyst at D.A. Davidson & Company.

“In our view, the key debate is about the sustainability of ZM’s growth post-pandemic and we take the view that ZM will be increasingly necessary to enable a hybrid remote work strategy and that many of the changes in work brought on by the pandemic are irreversible in nature. We maintain our BUY rating and $600 price target on Zoom Video Communications,” N. Jaluria added.

Zoom Stock Price Forecast

Twenty equity analysts forecast the average price in 12 months at $486.33 with a high forecast of $611.00 and a low forecast of $315.00. The average price target represents a 1.67% increase from the last price of $478.36. From those 20 analysts, ten rated “Buy”, nine rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $380 with a high of $530 under a bull-case scenario and $250 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the video communications provider’s stock.

“We are rolling forward our price target a year as the year comes to a close. As a result, our price target increases to $380 from $350, which represents 29x EV/FY23e Revenue or 28x EV/discounted FY32e FCF. We believe that while COVID-19 keeps video conferencing as a critical piece of employee connectivity, valuation is likely to remain closer to our bull case,” said Meta Marshall, equity analyst at Morgan Stanley.

“Our bull case moves to $530 from $500 and represents 31x EV/FY23e Rev or 29x EV/discounted FY32e FCF. Our bear case also increases to $250 from $210, which represents 19x EV/FY23e Revenue or 27x EV/discounted FY32e FCF. Risks to valuation remain macro headwinds, competitive efforts, COVID-19 vaccine causes a return to work/school.”

Several other analysts have also upgraded their stock outlook. Citigroup raised their stock price forecast to $467 from $377; RBC lowered the price target to $550 from $600; Credit Suisse upped their target price to $340 from $315; JP Morgan raised the target price to $450 from $425; Bernstein increased their target price to $611 from $228 and D.A. Davidson increased their target price to $600 from $460.

Analyst Comments

“Zoom eliminates barriers to video conferencing growth. Company has meaningful competitive moat built on more than just architecture. Leveraging position with customers to be center of UC platform. WFH has permanence but diminishes post-COVID-19. Valuation credits significant expansion opportunities in broader unified communications landscape, supported by initial Phone execution,” Morgan Stanley’s Marshall added.

Upside and Downside Risks

Risks to Upside: 1) Zoom Phone adopted faster than expected. 2) Sales efficiency matches previous levels. 3) International business shows continued leverage. 4) Topline beats to flow to bottom line WFH permanence. 5) K-12 Market – highlighted by Morgan Stanley.

Risks to Downside: 1) Macro conditions suffer. 2) Large competitor refreshes portfolio and gets aggressive on the price. 3) WFH wanes post COVID-19. 4) China / K-12 opportunity not monetizable.

Check out FX Empire’s earnings calendar

European Equities: Economic Data and Brexit in Focus

Economic Calendar:

Tuesday, 1st December

Spanish Manufacturing PMI (Nov)

Italian Manufacturing PMI (Nov)

French Manufacturing PMI (Nov) Final

German Manufacturing PMI (Nov) Final

German Unemployment Change (Nov)

German Unemployment Rate (Nov)

Eurozone Manufacturing PMI (Nov) Final

Eurozone Core CPI (YoY) Prelim

Eurozone CPI (MoM) Prelim

Eurozone CPI (YoY) (Nov) Prelim

Wednesday, 2nd December

German Retail Sales (MoM) (Oct)

Spanish Unemployment Change

Eurozone Unemployment Rate (Oct)

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a bearish end to the month and the start of the week for the European majors on Monday. Coming off the back of a bullish week, the DAX30 and EuroStoxx600 fell by 0.33% and by 0.98% respectively. The CAC40 slid by 1.42%, however, to lead the way down.

On the day, a lack of progress towards Brexit and some profit-taking following an impressive November rebound left the majors in the red.

Inflation figures from the Eurozone and stats from the U.S didn’t help, however, with the stats skewed to the negative.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Prelim November inflation figures for Spain, Italy, and Germany were in focus on the day.

In Spain, consumer prices fell by 0.8% in November, compared with November 2019. In October, consumer prices had also fallen by 0.8%. The harmonized index of consumer prices fell by 0.9%, following a 0.9% decline in October. Economists had forecast a 0.8% decline, year-on-year.

Things were not much better from Italy, with consumer prices falling by 0.1% in November, month-on-month. In October, consumer prices had risen by 0.2%.

From Germany, deflationary pressures saw a marked pickup. Consumer prices slid by 0.8% in November, reversing a 0.1% rise from October. Economists had forecast a 0.7% decline.

From the U.S

Chicago PMI numbers for November and October pending home sales figures also disappointed.

The Chicago PMI fell from 61.1 to 58.2 in November, with pending home sales falling by 1.1% in October. In September, pending home sales had fallen by 2.0%.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Daimler rose by 0.32% to buck the trend on the day. Continental and Volkswagen slid by 2.35% and by 3.27% respectively, however, with BMW seeing a more modest 0.04% loss on the day.

It was also a bearish day for the banks. Deutsche Bank fell by 1.44%, with Commerzbank sliding by 3.38%.

From the CAC, it was a bearish day for the banks. BNP Paribas and Credit Agricole fell by 1.96% and by 1.93% respectively. Soc Gen slid by 3.70% to lead the way down, however.

It was also a bearish day for the French auto sector. Peugeot fell by 1.13, with Renault sliding by 2.23%.

Air France-KLM also hit reverse, tumbling by 7.34%, with Airbus SE ending the day with a 2.52% loss.

On the VIX Index

It was a 5th consecutive day in the red for the VIX on Monday. Following a 1.93% decline on Friday, the VIX fell by 1.30% to end the day at 20.57.

On Monday, the Dow and S&P500 fell by 0.91% and by 0.46% respectively, with the NASDAQ slipping by 0.06%.

The downside for the VIX came in spite of the losses across the U.S benchmarks, with COVID-19 vaccine hopes weighing.

VIX 011220 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. November Manufacturing PMIs for Italy and Spain, and prelim Eurozone inflation figures for November are due out in the early part of the session.

German unemployment figures and finalized manufacturing PMIs for France, Germany, and the Eurozone are also due out.

Expect Italy, Germany, and the Eurozone’s manufacturing PMIs and Germany’s unemployment figure to have the greatest influence.

From the U.S, the market’s preferred ISM Manufacturing PMI for November will also provide direction late in the session.

Earlier in the day, China’s CAXIN Manufacturing PMI for November will set the tone following impressive NBS numbers on Monday.

Away from the economic calendar, Brexit and COVID-19 news updates will need monitoring. Any progress towards a stimulus package on Capitol Hill would influence.

The Futures

In the futures markets, at the time of writing, the Dow was up by 15 points.

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

European Equities: A Month in Review – November 2020

The Majors

It was a particularly bullish month for the European majors in November, with COVID-19 vaccine news delivering a much-needed bounce.

After 2 consecutive months in the red, the CAC40 surged by 20.12%. The DAX30 and the EuroStoxx600 weren’t far behind, with gains of 15.01% and 13.73% respectively. For the DAX30, November’s gains reversed losses from the year to move into positive territory year-to-date. The CAC40 and EuroStoxx600 still have some way to go in order to reverse losses from earlier in the year, however.

While the news of a COVID-19 vaccine drove demand for riskier assets, Joe Biden’s victory in the Presidential Election added support for riskier assets.

On the negative side, however, was a reintroduction of lockdown measures by member states including France and Germany.

Towards the end of the month, the COVID-19 numbers reflected the effect of the lockdown measures.

In France, the number of new COVID-19 cases and hospitalizations were in decline allowing the government to ease lockdown measures going into December.

On the geopolitical risk front, last-ditch Brexit negotiations failed to deliver a deal, which left the majors in the red at the end of the month.

The Stats

It was a busy month on the Eurozone economic calendar. Looking at the private sector PMIs, it was a disappointing set of numbers for November.

Service sector activity contracted in France, Germany, and across the Eurozone as a result of a reintroduction of containment measures.

France’s services sector suffered the most, with the PMI tumbling from 46.5 to 38.0. With Germany’s Services PMI falling to 46.2, the Eurozone’s Services PMI fell from 46.9 to 41.3.

While Germany’s manufacturing sector avoided a contraction, sector activity in France contracted. The PMI fell from 51.3 to 49.1, dragging the Eurozone’s Composite PMI down from 50.0 to 45.1.

In spite of the disappointing numbers, hopes of a COVID-19 vaccine fuelled economic recovery fuelled muted the effect of the PMIs.

Other stats were mixed in the month.

Consumer and business sentiment weakened in October as a result of the 2nd wave of the pandemic and lockdown measures.

Germany’s ZEW Economic Sentiment Indicator fell from 52.3 to 32.8, with the Ifo Business Climate Index falling from 92.5 to 90.7.

Things were not much better on the consumer confidence front. The GfK Consumer Climate Indicator fell from -3.2 to -6.7.

For the Eurozone, consumer confidence also waned, with the Eurozone Consumer Confidence Index falling from -15.5 to -17.6.

On the positive front, however, were 3rd quarter GDP numbers for France, Germany, and the Eurozone. The respective economies had made progress in recovering from the 2nd quarter economic meltdown before November’s lockdown measures.

From the U.S

Labor market stats pointed to a stalling in the labor market recovery. Initial jobless claims inched up to 778k after having eased down to 709k in the 1st week of November.

While new COVID-19 cases surged across the U.S and a number of states reintroduced containment measures, COVID-19 vaccine news eased any market tensions in the month.

As a result of the jump in COVID-19 cases, consumer confidence softened in November. The CB Consumer Confidence Index fell from 101.4 to 96.1, with the Michigan Consumer Sentiment Index falling from 77.0 to 76.9.

On the positive, however, were private sector PMIs. Both the manufacturing and services sectors saw activity pick up in November.

In November, the Markit Manufacturing PMI rose from 53.4 to 56.7, with the Services PMI rising from 56.9 to 57.7.

The divergence from the Eurozone stemmed from a decision by the U.S administration to keep the economy running.

Monetary Policy

The ECB monetary policy meeting minutes, Economic Bulletin, and Financial Stability Review talked of doom and gloom.

From the minutes and other ECB reports and from ECB President Lagarde commentary, the markets are expecting further policy easing, however.

While the ECB minutes stated that there should be no commitments made, the 2nd wave COVID-19 pandemic is likely to force the ECB’s hands. It remains to be seen how far the ECB will go with a COVID-19 vaccine on the horizon.

From the FED, the FOMC meeting minutes also provided few surprises. Both central banks were focused on the effects of COVID-19 on their respective economies.

The respective minutes followed decisions by both to keep rates unchanged in the month.

The Market Movers

For the DAX: It was a bullish month for the auto sector in November. Daimler surged by 26.99%, with BMW and Continental jumping by 23.99% and by 24.73% respectively. Volkswagen trailed with a 12.52% gain in the month.

It was also a bullish month for the banks. Deutsche Bank rallied by 17.04%, with Commerzbank ending the month up by an impressive 28.8%.

From the CAC, it was a particularly bullish month for the banking sector. BNP Paribas surged by 43.95%, with Credit Agricole and Soc Gen ending the month with gains of 42.63% and 43.38% respectively.

It was also a bullish month for the auto sector. Peugeot rose by 28.06%, with Renault jumping by 56.94%.

Supported by COVID-19 vaccine news, however, it was Air France-KLM that impressed the most with a 77.94% rebound. Airbus SE also impressed, surging by 40.17%.

On the VIX Index

It was back into the red for the VIX in November, ending a run of 2 consecutive monthly gains. Reversing a 44.18% surge in October, the VIX tumbled by 45.90% to end the month at 20.57.

The downside for the VIX came as pharmas released impressive COVID-19 phase 3 clinical trial results. Talk of a vaccine being available by mid-December supported riskier assets, which sank the VIX.

In November, the Dow and NASDAQ rallied by 11.84% and by 11.80% respectively, with the S&P500 ending the month up by 10.75%.

VIX November Monthly Chart

The Month Ahead

We can expect another busy month ahead on the Eurozone economic calendar. Much of the economic data, however, will likely take a backseat in the month ahead.

We would expect COVID-19 vaccine updates and any progress towards a COVID-19 stimulus package on Capitol Hill to be key drivers.

On the geopolitical front, there’s also Brexit for the markets to consider. In late November, last-ditch talks failed to deliver an agreement. The two sides have just one month left until the end of the transition period.

Key stats that will draw interest, however, will include private sector PMIs for December, unemployment figures, and consumer and business sentiment numbers.

From the U.S, private sector PMIs, labor market numbers, and consumer confidence and spending will also influence.

There are also stats out of China that will need to continue reflecting China’s post-pandemic economic recovery.

JetBlue Forecasts Revenue to Plunge 70% in Q4 as Fresh Spike in COVID-19 Cases Hurts

JetBlue Airways, a major American low-cost airline, forecasts revenue to plunge 70% y/y in the fourth quarter, worse compared to a previous prediction of nearly 65% y/y decline, and expects cash burn to surge to around $8 million per day as a resurgence in COVID-19 cases hammered air travel demand.

The passenger carrier said given the recent booking trends and the delay in receipt of cash tax refunds of nearly $70 million originally anticipated during the fourth quarter, the company now expects its average daily cash burn in the fourth quarter to be in a range of $6 million and $8 million, compared to its prior expectation of a range between $4 million and $6 million.

Booking trends remain volatile and the company continues to believe demand and revenue recovery will be non-linear through the fourth quarter and beyond, JetBlue added.

JetBlue Airways’ shares were down about 16% so far this year, traded nearly flat in pre-market trading on Monday.

JetBlue Airways Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at $13.50 with a high forecast of $17.00 and a low forecast of $12.00. The average price target represents a -14.29% decrease from the last price of $15.75. From those ten analysts, three rated “Buy”, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $16 with a high of $29 under a bull-case scenario and $6 under the worst-case scenario. The firm currently has an “Overweight” rating on the ratings company’s stock.

Several other analysts have also upgraded their stock outlook. Stifel raised their price target to $13 from $12. Cowen and Company upped their target price to $13 from $10. Credit Suisse increased the target price to $12 from $11. JP Morgan lowered the target price to $16 from $17. UBS raised the target price to $13 from $9.

Analyst Comments

“We like JetBlue’s significant exposure to the “Medium Haul” U.S. domestic market, which we believe is likely to be the first to return (with short-haul challenged by driving and long-haul more challenged by international regulations). Additionally, JBLU’s “snowbird” network provides significant upside as leisure travel returns,” said Ravi Shanker, equity analyst at Morgan Stanley.

“We use a 10-year DCF assuming a 6.8% WACC and terminal cash flow perpetual growth rate of 2%. Our DCF valuation implies a 2023 EV/EBITDAR multiple of 6.1x, which is in line with LUV’s historical average given the “best in class” operating model,” Shanker added.

Upside and Downside Risks

Risks to Upside: 1) COVID-19 vaccine timing. 2) Leisure market recovery for point to point network. 3) Industry rationalization and fare stability – highlighted by Morgan Stanley.

Risks to Downside: 1) COVID-19 the second wave. 2) Better improvement in international travel vs. domestic.

Stocks Retreat As Traders Take Profits After November Rally

A Busy Week Ahead

S&P 500 futures are losing ground in premarket trading as investors wait for new catalysts which could push stocks to new highs.

November was a great month for stocks so some traders and investors prefer to take some profits off the table near record highs.

The economic calendar is busy this week, and current market optimism will soon get tested by many economic reports. Today, the U.S. will release Pending Home Sales report which is expected to show that Pending Home Sales increased by 1% month-over-month in October.

This report will be followed by Manufacturing PMI report for November which will be published on Tuesday. Traders’ attention will shift to the job market on Wednesday when the U.S. will release ADP Employment Change report. Initial Jobless Claims report will be published on Thursday, followed by Non Farm Payrolls and Unemployment Rate reports on Friday.

Job market reports will likely have a significant impact on the market as they will indicate whether the economy continues to rebound despite the second wave of coronavirus.

U.S. Dollar Falls To New Lows

The U.S. Dollar Index managed to get below the support at the yearly lows at 91.75 and continues to move lower.

The U.S. dollar is under pressure as traders bet that Biden presidency will bring a huge stimulus package while the Fed will keep rates at the bottom for years.

The weak dollar may provide an additional boost for U.S. stocks and commodities. At this point, the main beneficiary of U.S. dollar’s weakness is copper which has managed to get to levels not seen since early 2013.

Interestingly, gold and silver remain under pressure despite the weak dollar as demand for safe haven assets decreased due to recovery hopes.

OPEC+ Begins Two-Day Negotiations

OPEC+ members will have two days to discuss their next move. At this point, the market expects that OPEC+ will extend current production cuts for the first three months of 2021. However, recent reports suggested that OPEC+ is also discussing a gradual increase of production.

WTI oil has recently made an attempt to settle below the psychologically important $45 level but failed to gain downside momentum. Oil will likely be very volatile in the upcoming trading sessions as traders wait for OPEC+ decision.

Meanwhile, oil-related stocks look ready to move lower at the start of today’s trading session as traders continue to take their profits after a massive rally in November.

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

Asia-Pacific Shares Down Across the Board; China Reports Upbeat Factory Activity

The major Asia-Pacific stock indexes closed lower on Monday as investors took profits and squared positions on the last day of trading in November. Traders showed little reaction to potentially bullish data from China showing a further expansion in the manufacturing sector. Trade frictions between Washington and Beijing may have also weighed on investor sentiment.

In the cash market on Monday, Japan’s Nikkei 225 Index settled at 26433.62, down 211.09 or -0.79%. South Korea’s KOSPI Index finished at 2591.34, down 42.11 or -1.60% and Hong Kong’s Hang Seng index closed at 26341.49, down 553.19 or -2.06%.

In China, the Shanghai Index settled at 3391.76, down 16.55 or -0.49% and in Australia, the S&P/ASX 200 Index finished at 6517.80, down 83.30 or -1.26%.

China’s Factory Activity Expands at Fastest Pace in Over Three Years

China’s factory activity expanded at the fastest pace in more than three years in November, while growth in the services sector also hit a multi-year high, as the country’s economic recovery from the coronavirus pandemic stepped up.

Upbeat data released on Monday suggests the world’s second-largest economy is on track to become the first to completely shake off the drag from widespread industry shutdowns, with recent production data showing manufacturing now at pre-pandemic levels.

China’s official manufacturing Purchasing Manager’s Index (PMI) rose to 52.1 in November from 51.4 in October, data from the National Bureau of Statistics showed. It was the highest PMI reading since September 2017 and remained above the 50-point mark that separates growth from contraction on a monthly basis. It was also higher than the 51.5 median forecast in a Reuters poll of analysts.

Trump to Add China’s SMIC and CNOOC to Defense Blacklist:  Reuters, Citing Sources

The Trump administration is poised to add China’s top chipmaker SMIC and national offshore oil and gas producer CNOOC to a blacklist of alleged Chinese military companies, according to a document and sources, curbing their access to U.S. investors and escalating tensions with Beijing weeks before President-elect Joe Biden takes office.

Japan Oct Retail Sales Rise; Factor Output Grows for Fifth Month

Japanese retail sales rose 6.4% in October from a year earlier, up for the first time in eight months and matching a median market forecast, government data showed on Monday.

Japan’s industrial output rose for the fifth straight month in October signaling the economy was recovering further from the damage caused by the COVID-19 crisis.

Official data released on Monday showed factory output jumped 3.8% in October from the previous month, mainly due to strength in general machinery production and motor vehicle manufacturing.

The solid increase beat the median market forecast of a 2.1% rise in a Reuters poll of economists, and was in line with the prior month’s 3.9% gain.

Aussie Shares Tumble Amid Spat with China Over Hefty Wine Tariffs

Shares in Australia fell sharply on Monday after the country’s Treasury Wine Estates said it would divert hundreds of thousands of case of China-bound wine to other countries to avoid hefty tariffs, battering its shares as it acknowledged its future in its biggest market was unclear.

After Beijing imposed a 169.3% mark-up as part of an industry-wide anti-dumping investigation, the world’s largest listed winemaker said it would redirect sales of its prized Penfolds label to the U.S., Europe, elsewhere in Asia and domestically.

Treasury shares fell as much as 12% in early trade on Monday, against a slightly weaker broader market. The stock is down a third since China announced the anti-dumping investigation in August.

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

S&P Global in Advanced Talks to Acquire London-based IHS Markit for $44 Billion

S&P Global Inc, a leading provider of independent ratings, benchmarks, analytics and data to markets worldwide, is in advanced talks to acquire IHS Markit, a financial information services company, for nearly $44 billion, according to the Wall Street Journal.

This deal for IHS would be the largest of the year globally, according to Dealogic data, topping both chipmaker Nvidia Corp’s about $40 billion deal to buy chip designer Arm Holdings and nearly $40 billion deal between Nippon Telegraph & Telephone Corp. and a subsidiary, reported by the WSJ.

S&P Global’s shares closed 1.0 4% higher at $341.57 on Friday; the stock is up about 25% so far this year.

S&P Global Stock Price Forecast

Nine equity analysts forecast the average price in 12 months at $397.25 with a high forecast of $422.00 and a low forecast of $353.00. The average price target represents a 16.30% increase from the last price of $341.57. From those nine analysts, seven rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $411 with a high of $629 under a bull-case scenario and $242 under the worst-case scenario. The firm currently has an “Overweight” rating on the ratings company’s stock.

Several other analysts have also upgraded their stock outlook. UBS raised the price target to $424 from $422. BMO lowered their stock price forecast to $375 from $392. Credit Suisse increased their target price to $405 from $400. Stifel upped the target price to $353 from $351 and Oppenheimer raised the price objective to $399 from $396.

Analyst Comments

“S&P Global’s collection of businesses include a top two ratings agency, a leading index franchise, a market data platform, and a leading commodity pricing provider. It has a wide moat, strong market share, and high margins,” said Toni Kaplan, equity analyst at Morgan Stanley.

“We expect SPGI’s pricing power, the potential for product innovation, global expansion, commercial transformation, and cross-enterprise opportunities will drive an 11% EPS CAGR through 2024 with potential upside from China, Kensho, and ESG,” Kaplan added.

Upside and Downside Risks

Risks to Upside: Better-than-expected debt issuance due to rapid economic recovery. Counter-cyclicality of non-transaction revenue and ERS business could offset weaker issuance. Higher-than-expected synergies from BvD acquisition – highlighted by Morgan Stanley.

Risks to Downside: Greater-than-expected issuance decline due to credit-led recession. Additional industry regulation. Increased share loss to smaller rating agencies in both structured and corporate.

European Equities: The Futures Point South, with Stats on the Quieter Side

Economic Calendar:

Monday, 30th November

Spanish CPI (YoY) Prelim

Spanish HICP (YoY) (Nov) Prelim

Italian CPI (MoM) (Nov) Prelim

German CPI (MoM) (Nov) Prelim

Tuesday, 1st December

Spanish Manufacturing PMI (Nov)

Italian Manufacturing PMI (Nov)

French Manufacturing PMI (Nov) Final

German Manufacturing PMI (Nov) Final

German Unemployment Change (Nov)

German Unemployment Rate (Nov)

Eurozone Manufacturing PMI (Nov) Final

Eurozone Core CPI (YoY) Prelim

Eurozone CPI (MoM) Prelim

Eurozone CPI (YoY) (Nov) Prelim

Wednesday, 2nd December

German Retail Sales (MoM) (Oct)

Spanish Unemployment Change

Eurozone Unemployment Rate (Oct)

Thursday, 3rd December

Spanish Services PMI (Nov)

Italian Services PMI (Nov)

French Services PMI (Nov) Final

German Services PMI (Nov) Final

Eurozone Markit Composite PMI (Nov) Final

Eurozone Services PMI (Nov) Final

Eurozone Retail Sales (MoM) (Oct)

Friday, 4th December

German Factory Orders (MoM) (Oct)

IHS Markit Construction PMI (Nov)

The Majors

It was a bullish end to the week for the European majors on Friday. The CAC40 rose by 0.56%, with the DAX 30 and the EuroStoxx600 ending the day with gains of 0.37% and 0.41% respectively.

Following a mid-week blip stemming from concerns over the state of the economy, the markets returned attention to vaccine news.

With the markets expecting a vaccine to become available by mid to late December, expectations of an economic rebound in early 2021 supported riskier assets.

News of easing restrictions also provided support. The CAC40 was the main beneficiary, which found additional support from news of falling new cases and hospitalizations in France.

The Stats

It was a relatively busy day on the Eurozone economic calendar. Finalized 3rd quarter GDP, October consumer spending, and prelim November inflation figures from France were in focus.

The stats were skewed to the positive, providing the CAC40 with support through the early part of the session.

Consumer spending jumped by 3.7%, reversing most of a 4.4% slide from September. Consumer prices and the harmonized index of consumer prices both increased by 0.2% following a flat October. And finally, the French economy expanded by 18.7% in the 3rd quarter, which was revised up from a prelim 18.2%.

From the U.S

There were no material stats with the U.S markets on a half-day for Thanksgiving.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Friday. BMW and Volkswagen fell by 0.83% and by 1.69% respectively. Continental and Daimler saw relatively more modest gains of 0.51% and 1.09% respectively, however.

It was a bullish day for the banks. Deutsche Bank and Commerzbank saw gains of 1.20% and 1.85% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.06%, with Credit Agricole and Soc Gen seeing more modest gains of 0.37% and 0.80% respectively.

It was also a bullish day for the French auto sector. Peugeot and Renault ended the day with gains of 1.14% and 1.37% respectively.

Air France-KLM continued to find support, rallying by 4.82%, with Airbus SE eking out a 0.22% gain.

On the VIX Index

It was a 4th consecutive day in the red for the VIX on Friday. Following a 1.80% decline on Wednesday, the VIX fell by 1.93% to end the day at 20.84. Thursday was a public holiday in the U.S.

On Friday, the Dow and S&P500 saw gains of 0.13% and by 0.24% respectively, with the NASDAQ rising by 0.92%.

VIX 301120 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Prelim November inflation figures are due out from Spain, Italy, and Germany.

The numbers are unlikely to have a material impact on the European majors, with further ECB policy easing priced in.

From the U.S, Chicago PMI and pending home sales are due out. Expect the Chicago PMI to have a greater influence late in the session.

NBS private sector PMIs from China due out ahead of the European open will set the tone.

Away from the economic calendar, updates from Brexit negotiations from the weekend and COVID-19 news updates will also influence.

The Futures

In the futures markets, at the time of writing, the DAX was down by 63 points, with the Dow down by 112 points.

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