The Empire State Manufacturing Index came in at negative-32.9 in January, while -8.3 was expected in a Bloomberg consensus. As a result, the Dow Jones Industrial Average futures inched down 0.3%, S&P 500 futures was flat and Nasdaq futures fell 0.3% minutes before the open.

Several big companies released their results, including banks. Morgan Stanley rose 1.5% after posting Q4 revenue that beat analysts' expectations. However, Goldman Sachs dropped 2.4% after it reported lower Q4 earnings and revenue.

Chinese growth figures for 2022 were released last night, and they are all better than economists’ expectations. An economist, I remind you, is someone who spends his time being wrong but has enough knowledge to explain why. A stock market columnist is the same, but without the knowledge. In any case, Chinese growth has reached 3% in 2022, which is slightly higher than expected. And that would make most mature economies drool with envy. The commentary, also relative, from China's National Bureau of Statistics, reads "The national economy withstood pressure and reached a new level in 2022.

In absolute terms, this is much less glamorous. China's growth has not been this low since 1976, except for the lockdown year of 2020. It is both significantly below the targets set at the beginning of the year (5.5%) and well below the average of previous years. China no longer needs to post more than 8% annual growth to create jobs that can absorb the rural exodus of recent decades. But it can't afford to go too low either. The other news is that the country's population has fallen, something not seen since the aftermath of the great famine of 1959. The former Middle Kingdom lost 850,000 people in 2022, compared to 1.412 billion in 2021. We can't call it a hemorrhage, but it gives an idea of the societal challenge that awaits the country.

Investors are digesting the news this morning. China's growth is not great, but last quarter's numbers are a little less bad than expected, on consumption and investment in particular. Wouldn't such poor macroeconomic data push the Communist Party to launch support plans? When you mix the relative and the absolute with the concept "bad economic news is good news for the financial markets because it will lead to a political and/or monetary response", you end up with a multitude of possibilities. This complicates the prognosis game considerably.

 

Economic highlights of the day:

Germany’s second reading of its December inflation and the US Empire Manufacturing index for January are today’s main indicators. All the agenda is here. 

The dollar fell slightly to EUR 0.9205 and GBP 0.8143. The ounce of gold fell to USD 1914. Oil is firm, with North Sea Brent at USD 86.04 a barrel and US WTI light crude at USD 80.73. The yield on 10-year US debt is edging up to 3.53%. Bitcoin is holding steady around USD 21,100.

 

In corporate news:

* Goldman Sachs reported a sharper-than-expected 69% drop in quarterly profit on Tuesday due to heavy losses in its consumer business and a drop in trading in the investment bank. The stock is down 1.7% in pre-market trading.

* Morgan Stanley reported Tuesday that it beat expectations in the fourth quarter as trading activity benefited from volatile financial markets, offsetting weakness in M&A activity. The stock is up 1% in pre-market trading.

* Microsoft is likely to receive a warning from the European Commission over its $69 billion bid for Activision, people close to the matter said. In addition, Activision shares fell 1.3% in pre-market trading after its Chinese partner NetEase refused to extend their current licensing agreement in China by six months.

* AbbVie, Eli Lilly - The two pharmaceutical companies have pulled out of Britain's Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) drug pricing agreement, the Association of the British Pharmaceutical Industry, an industry body, announced Monday.

* Didi - The Chinese VTC giant announced Monday that it will resume downloading its apps in China and register new users after the authorities partially suspended its services in 2021.

* Chevron and Eni announced Sunday that they have made a new gas discovery in an Egyptian offshore field in the eastern Mediterranean.

* United Airlines will release its fourth-quarter earnings after the close on Wall Street.

* Palantir Technologies expects to hire hundreds of people this year despite the prospect of an economic slowdown, CEO Alex Karp said Monday on the sidelines of the World Economic Forum in Davos.

 

Analyst recommendations:

  • 888 Holdings: Berenberg remains Buy with a reduced price target of GBp 320 to GBp 220.
  • Asos: Jefferies maintains a Hold rating with a price target raised from GBp 625 to GBp 750.
  • Associated British Foods: Jefferies remains "Hold" with a price target raised from GBp 1,500 to GBp 1,750.
  • Cheesecake Factory: Citi downgrades to neutral from buy. PT set to $39, implies a 1.2% increase from last price.
  • Churchill Downs: JMP Securities initiated coverage with a recommendation of market outperform. PT set to $273.
  • Coca-Cola HBC: Numis resumes tracking at accumulate targeting GBp 2200.
  • Cognex: Morgan Stanley downgrades to underweight from equal-weight. PT down 25% to $40.
  • Entain: Berenberg remains Buy with a price target reduced from GBp 2000 to GBp 1930.
  • Fidelity National: Barclays downgrades to equal-weight from overweight. PT up 4.7% to $73.
  • Global Payments: Morgan Stanley upgrades to overweight from equal-weight. PT up 25% to $135.
  • NatWest: Berenberg remains Buy with a price target raised from GBp 350 to GBp 380.
  • NCC Group: Berenberg upgrades from buy to hold, targeting GBp 240.
  • Paychex: Barclays analyst downgrades to underweight from equal-weight. PT down 8.6% to $110.
  • SJW: RBC Capital Markets downgrades to sector perform from outperform. PT up 6% to $85.
  • Tesla:  Goldman Sachs has maintained its recommendation on the stock with a Buy rating. Previously set at USD 205, the target price has been slightly modified to USD 200.
  • Tetra Tech:  KeyBanc Capital Markets upgrades Tetra Tech Inc. to overweight from sector weight. PT up 25% to $185.
  • Valero Energy: BMO Capital Markets upgrades to outperform from market perform. PT up 18% to $160.
  • Wells Fargo: Jefferies analyst downgrades to hold from buy. PT up 4% to $46.
  • Wendy's: Deutsche Bank downgrades to hold from buy. PT down 0.3% to $23.