Despite the ECB board members attempts at rolling back the “hawkish” rhetoric about inflation, we have negative EU futures: DAX, FTSE MIB. Rising bond yields and inflation penalize the NASDAQ and S&P 500, at writing.
As expected, the stock markets are shaken by the surge in volatility caused by yesterday’s US data.
Consumer prices in January rose 7.50% YOY, against estimates at + 7.30% and the previous December figure at + 7%. The figure net of the more volatile components of energy and food grew by 6% against the estimated + 5.90%. The boost came mainly from the rent component to a lesser extent, but still important, from the food component. There was a loss of purchasing power in January as weekly real wages drop by $ 12.4 to $ 387.
The bond market continues to be under pressure. The United States 10-Year Treasury Note rose above 2%, a psychological threshold that had never been crossed in the last two and a half years. The United States 2-Year is at 1.47%, +11 basis points. The yield curve squeezes to 52 basis points, the lowest since September 2020.
Bond Yields Rise In Europe As Well
In Europe, the Euro Bund Futures yields +0.28%, +7 basis points. The Italian BTP is at 1.88%, up from 1.76% yesterday. The spread widened to 160 bps. Bloomberg wrote yesterday that within the ECB board there are perplexities and doubts about the projections coming from the internal statistics office, there are some members who are wary of forecasts on the decline in inflation in the second half of the year.
Chief economist Philip Lane defends these assumptions, but the line-up of those asking for drastic and immediate action is increasingly fierce.
Hot Stocks and Instruments
- Twitter (NYSE:TWTR) -0.2%, closed the fourth quarter with revenues up by 22% to 1.57 billion dollars, in line with expectations. Net income fell to 182 million from 222 million in the same period last year due to the jump in expenses. Twitter has announced a $ 4 billion buyback plan, the first since March 2020.
- Tim (TIT), Iliad took note of the negative response from Vodafone (NASDAQ:VOD) to the 11.25 billion euro offer presented for the Italian activities of the British group.
- NASDAQ: We are starting to hypothesize a very aggressive hike by the Fed.
Conclusions
Regarding Twitter, I'm not optimistic its fair price according to my models is $32, profitability continues to be low, unlike other social networks.
Regarding Telecom, the news is positive as threats to market share decrease. My evaluation does not change, even during the sessions with prices at 0.50, I have always given my negative opinion on the stock. I am not convinced by the industrial plan and, as usual, the financial situation is not solid, and this is combined with low growth prospects.
On the NASDAQ, the market began to price in a 0.5% rate hike now, from the previous 0.25%. This hypothesis is not remote and would constitute a shock for many tech companies that resort to financing. I expect new lows on the NASDAQ in the 13.500 area.
Regarding my portfolio, I am going to increase exposure on the Norwegian Air Shuttle ASA (OTC:NWARF) stock ahead of the quarterly report on Feb. 18.