The NYSE is going to switch from T+2 trading to T+1 trading. Written like that, it sounds as exciting as watching paint dry. Yet it's a major change that has forced financial institutions to devote additional resources, both in terms of investment and personnel, to ensure that the move takes place smoothly. But what exactly are we talking about?

From today, transactions in certain financial assets such as equities and ETFs will have to be processed in one business day (T+1), compared with two (T+2) previously. Financial market historians have recently pointed out that this represents a return to basics, since a century ago, transactions were carried out in T+1. This was because markets were much simpler back then, with less liquidity and the need to trade quickly to avoid unpleasant surprises. Subsequently, the rule was changed to T+5. Technological advances brought T+3 in 2004, followed by T+2 in 2017. 2024 therefore marks the return to T+1, even if there has been debate around the merits of moving to T+0 (which is already the case, for example, for cryptocurrencies since they are based on blockchain, and even recently on the Indian market). Some assets, however, will retain T+2 or T+3 systems due to their structure. Canada and Mexico also switched to T+1 yesterday.

Shortening the time between order validation and settlement is supposed to enhance market fluidity and reduce excesses, in particular abusive short selling, price manipulation or the exploitation of loopholes. A few fears have recently arisen, reminding me of “Y2K” (if you're young, you probably won’t understand). Among them, will international investors be able to raise enough dollars in time? How will systems that coexist on different time scales interact? How can we deal with errors in a shorter timeframe? The head of Sifma, the trade body that oversees US financial intermediaries, said he was confident because companies in the sector are. Europe is currently in T+2, but should move to T+1 by 2026, when the texts are ready.

Among today’s other important events, Loretta Mester and Michelle Bowman, two central bankers affiliated with the conservative fringe of the Fed, did not deviate from their habits and warned investors they are in no rush to see rates fall. On the ECB side, the institution's chief economist, Philip Lane, explained yesterday that he sees a rate cut next week, but that the institution should maintain a restrictive bias. Meanwhile, the governor of the French central bank, François Villeroy de Galhau, did not rule out two consecutive rate cuts in June and July. If all this is put together, a rate cut should still be reached next week, which could help eurozone equities regain momentum.

Oil prices have tightened with renewed tension in the Middle East following the death of an Egyptian border guard in a clash with Israeli troops and the Israeli air strike that killed at least 40 Palestinians. In addition, OPEC+ meets on Sunday to discuss production.

In Asia Pacific this morning, Japan and Australia closed slightly down. Other markets were up just as much. In China, the real estate sector initially benefited from an easing of home-ownership conditions by the authority managing the Shanghai area, but the momentum faded. The technology sector also benefited initially from the commitment of China's major state-owned banks to invest the equivalent of 15 billion euros in a fund dedicated to semiconductors, but the advance dried up. Europe’s main indexes are bearish, and Wall Street futures are hovering around zero, as investors brace for faster trade settlement.

Economic highlights of the day:

The FHFA house price index and the Conference Board consumer confidence index are on the agenda today. 

The dollar is slightly down to EUR 0.9196 and GBP 0.7819. The ounce of gold stabilizes at USD 2354. Oil rallies, with North Sea Brent at USD 83.15 a barrel and US light crude WTI at USD 78.97. The yield on 10-year US debt is stable at 4.46%. Bitcoin is trading at USD 68,280.

In corporate news:

  • Apple gains 2% in pre-market trading. According to Reuters calculations based on industrial data, the Apple group saw its iPhone sales in China jump 52% in April year-on-year.
  • Tesla - Voting advisory firm Glass Lewis announced on Saturday that it had recommended that Tesla shareholders reject a proposed $56 billion remuneration package for Elon Musk, the carmaker's CEO. If adopted, the proposal would give the businessman the largest compensation package for a CEO in US corporate history.
  • Microsoft - On Friday evening, a California federal judge dismissed a proposed lawsuit alleging that Microsoft and artificial intelligence (AI) start-up OpenAI used stolen personal data to train ChatGPT and other generative AI systems.
  • Amazon - AWS, the group's cloud division, is in talks with Rome to invest billions of euros in expanding its data center business in Italy, four sources close to the matter told Reuters.
  • GameStop climbed 20.5% in pre-market trading, as the retailer announced that it had raised nearly $933 million through the sale of 45 million shares in an “at the market” offering.
  • Hess Corp, Chevron - Hess shareholders vote this Tuesday on the proposed $53 billion acquisition of Chevron.

Analyst recommendations:

  • Amphenol: Citi analyst Asiya Merchant raised the target on Amphenol Corp. to $160 from $135. Maintains buy rating.
  • Huntington Bancshares Incorporated: JP Morgan upgrades to overweight from neutral with a target price raised from USD 16 to USD 18.
  • Zscaler, Inc.: Wells Fargo downgrades to equalweight from overweight with a target price reduced from USD 275 to USD 182.
  • Dell Technologies Inc.: Loop Capital Markets maintains its buy recommendation and raises the target price from USD 140 to USD 185.
  • Five Below: Truist Securities analyst R Scot Ciccarelli cut the target on Five Below Inc. to $176 from $204. Maintains buy rating.
  • Dupont De Nemours, Inc.: Citi upgrades to buy from neutral with a price target raised from USD 85 to USD 95.
  • Howmet Aerospace Inc.: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 70 to USD 90.
  • Lululemon Athletica Inc.: Stifel maintains its buy recommendation and reduces the target price from USD 539 to USD 410.
  • Fevertree Drinks Plc: Goldman Sachs downgrades to sell from neutral with a price target reduced from GBX 1075 to GBX 1050.
  • Hilton Food Group Plc: Investec downgrades to hold from buy with a price target raised from GBX 770 to GBX 955.