With cocoa prices soaring, drinking hot chocolate is becoming expensive. Apparently, orange juice is next, the FT pointed out yesterday. To top it all off, coffee is going through a little fever too. As for wheat, it's at its highest level in over a year. You'd better hurry up with your breakfast, because you won't be able to afford it any time soon. Everyone's fed up with inflation, even the Fed. Even investors, it seems.
 
The mood in the markets has changed this week. I'm not sure who blew the whistle on the carefree period, but financiers have decided that, finally, the US central bank's hard line on monetary policy is becoming an issue again. Maybe it's a belated realization? Maybe it's central banker Neel Kashkari's statements on the risks of rate hikes? Or the stronger-than-expected German inflation figures for May? Or the Fed's Beige Book unveiled last night, bringing the term stagflation back into fashion? The causes are probably multiple, but one thing is certain: the usual mechanism has been set in motion: Fed monetary policy perceived as tighter than expected = higher dollar + higher US debt yields + lower equities.
 
Last night, the Nasdaq 100 fell back from its record high (-0.7%). The S&P500 gave up 0.74% and the Dow Jones just over 1%. The old index failed to benefit from its usual shock absorbers, in particular UnitedHealth, its largest capitalization, which was swept away (-4%) by the fall of the entire health insurance sector. In Europe, the session was even more painful for some indices, notably the CAC40, which sank by 1.5%, the second biggest drop in 2024, if my morning tally is correct.
 
Investors are nervous. The nearest deadlines are Friday, with the May inflation figures for the eurozone, followed by the PCE inflation figures for the US in April. Should the data show a small upward gain, this week's bad karma could be confirmed. In the meantime, the market can brood on the poor quarterly results from Salesforce and Agilent. Clearly, the magic of AI has not enchanted the entire US technology sector. As investors are in a bad mood, disappointments are being paid for in cash this week: -13% for Agilent and -16% for Salesforce after their respective earnings. As Salesforce is one of the 10 most influential stocks on the Dow Jones, the American index will be struggling to do well today.
 
There will be quite a few macro indicators in the US this afternoon, although nothing will surpass Friday's PCE inflation this week. In other news, the WSJ understands that Donald Trump intends to take on Elon Musk as a political advisor should the former president return to office. China continues its diplomatic efforts with a summit in Beijing aimed at Arab countries. Xi Jinping is due to give a speech there today.
 
In the Asia-Pacific region, things are pretty yucky this morning. The Nikkei 225 closed down 1.3% in Japan. Hong Kong, Taiwan and South Korea are down -1.2% / -1.5% during the session. Australia, India and Shanghai are down -0.5%. Leading indexes in Europe are in the green but futures on Wall Street show no signs of recovery at this stage.
Today's economic highlights:
A new estimate of Q1 GDP and the latest jobless claims, as well as wholesale inventories, are on the agenda, along with US housing data and crude oil inventories. The full agenda is here
 
The dollar is worth EUR 0.9236 and GBP 0.7858. The ounce of gold remains under pressure at USD 2341. Oil lost a little ground, with North Sea Brent at USD 82.75 a barrel and US light crude WTI at USD 78.52. The yield on 10-year US debt climbed to 4.61% and retreated to 4.57%. Bitcoin is trading at USD 68,000.
In corporate news:
  • Salesforce is down 16% in pre-market trading after announcing that it expects sales of between $9.20 and $9.25 billion for the current quarter, compared with the LSEG consensus figure of $9.37 billion. The cloud services specialist also posted first-quarter sales of $9.13 billion, below expectations.
  • HP inc advanced 2.1% in pre-market trading, as the PC manufacturer reported sales of $12.8 billion for its fiscal second quarter, against analysts' average forecast of $12.6 billion, according to LSEG data.
  • Moderna climbs 6% in pre-market trading. The U.S. government is close to finalizing an agreement to fund a late-stage trial of the company's messenger RNA vaccine against avian flu, reports the Financial Times on Thursday.
  • American Eagle Outfitters fell by 8.3% in pre-market trading, as the group reported sales down to $1.14 billion in the first quarter, compared with $1.15 billion anticipated by the LSEG consensus. The American clothing chain suffered from persistent inflation, which affected demand, particularly for high-priced products.
  • Birkenstock raised its full-year sales forecast on Thursday to between 1.77 and 1.78 billion euros, as the German manufacturer of high-end sandals expects demand for its products to accelerate. The stock gained 10% before the opening.
  • Walt Disney - Billionaire Nelson Peltz's Trian Fund Management has sold its entire stake in Walt Disney after a boardroom battle with the media giant, CNBC reported Wednesday, citing a source close to the matter.
  • Palantir gains 2.5% in pre-market trading after winning a $480 million contract from the U.S. Department of Defense for the Maven Smart System project. This project will gather data from various sources to identify military points of interest and accelerate the work of intelligence analysts.
  • C3.AI jumps 8.7% in pre-market trading after reporting better-than-expected quarterly sales. The artificial intelligence (AI) software specialist also forecasts sales of between $370 million and $395 million for fiscal year 2025, against a consensus of $367.51 million.
  • Okta gained 4.8% before the opening after reporting a sales forecast above analysts' projections. Evercore ISI raised its recommendation from “in-line performance” to “outperform”.
  • Paypal - Mizuho raised its recommendation on the stock, which gained 2.3% before the opening, according to Thefly.com.

Analyst recommendations:

  • Ameren Corporation: Barclays upgrades to overweight from equalweight with a price target raised from USD 73 to USD 77.
  • Corning Incorporated: JP Morgan upgrades to overweight from neutral with a price target raised from USD 37 to USD 43.
  • First Solar, Inc.: Mizuho Securities downgrades to neutral from buy with a price target raised from USD 209 to USD 274.
  • Okta, Inc.: Evercore ISI upgrades to outperform from in-line with a price target raised from USD 102 to USD 122.
  • Paypal Holdings, Inc.: Mizuho Securities upgrades to buy from neutral with a price target raised from USD 68 to USD 90.
  • Salesforce.com, Inc.: Fubon Securities downgrades to neutral from buy with a target price reduced from USD 358 to USD 290. 
  • Nvidia Corporation: Daiwa Securities maintains its outperform recommendation and raises the target price from USD 871.33 to USD 1325. 
  • Workday Inc.: BNP Paribas Exane maintains its outperform recommendation and reduces the target price from 330 to USD 243.
  • Anglo American Plc: AlphaValue/Baader Europe upgrades to buy from add with a price target raised from GBX 3358 to GBX 3410.
  • Currys Plc: Berenberg upgrades to buy from hold with a price target raised from GBX 67 to GBX 90.
  • Mondi Plc: JP Morgan resumes coverage with a new neutral rating and a target price of GBP 15.80. JP Morgan upgrades to neutral from rating suspended with a target price of ZAR 370