Investors see a cooling US economy as supporting the scenario of a diminishing inflationary threat and a Fed that will be able, or obliged, to cut rates once or twice between now and the end of the year to preserve momentum. Anything that shows the US economy is losing steam is good news for risk assets. Since the beginning of the month, all the major data came come out worse than expected: the ISM activity indicators for industry and services were in contraction territory, April's job market data were weak and, on Friday, American consumers showed - via the University of Michigan's consumer confidence index - that their spirits were low and that they were fed up with inflation. It all adds up to the scenario of a central bank that will have to cut rates.

On the other hand, corporate earnings have bounced back sharply and should continue to do so in the quarters ahead, and leading indicators of US GDP point to an acceleration rather than a slowdown. Q1 earnings beat forecasts with the highest margin in two years.

To sum up, the market is bombarded with rather contradictory data, but it continues to rise. This is probably due to a high level of confidence that the US central bank will do what's necessary to get things right. If the economy slows down, there's little doubt that the first rate cut will take place in September. If the economy holds up or accelerates slightly, rates will probably remain high, but if indices keep rising, investors will remain happy. There will be two major tests for the market on Tuesday and Wednesday, with the April US producer price index (PPI) and consumer price index (CPI). Fed boss Jerome Powell is due to give a speech tomorrow at morning, after the PPI and before the CPI. The New York Federal Reserve also publishes its monthly survey of consumers’ inflation expectations later today.

In the meantime, it was the European and Chinese markets that shone last week. The old continent should benefit from an economic boost with a rate cut by the ECB at the beginning of June. It's all but a foregone conclusion, barring a major blow in the next three weeks. The Stoxx Europe 600 has just posted six consecutive sessions of gains, taking its 2024 total to 8.7% (10.2% with dividends), rivalling the S&P500 (+9.5%). The other market in shape at the moment is Chinese: the Hang Seng has gained 11.8% since January 1, and above all 29% since its low point on January 22. This coincides with a slight economic recovery in the country, support measures for the financial sector and a form of cauterization of the problems faced by property developers, some of whom have recently managed to repay their loans, whereas they had been unable to do so in previous quarters. China continues to be under threat from the tightening of tariffs in Europe and the United States, and from macroeconomic indicators that are still mixed. A further illustration came this weekend with inflation data in line with expectations, but weak credit data and producer prices. “There is growing confidence in the Chinese market, even if the economic indicators do not fully support this optimism”, said a trader at Maybank Securities. Bank of America, for its part, speaks of a “FOMO associated with favorable political announcements”. In any case, it's working for now.

Meanwhile, according to several sources, Joe Biden is going to impose a 100% surtax on Chinese electric vehicles. My great mathematical skills allow me to assert that he will therefore double unit prices. Tesla will be pleased. The White House is also planning to impose tariffs on medical devices manufactured in China. Details are expected early this week. Meanwhile, Chinese authorities just announced that it will issue very long-term bonds for the first time (50 years). The country also issued 20- and 30-year maturities. In total, the issue represents $140 billion, a sign of Beijing's efforts to finance the recovery, according to market estimates.

Two speeches by Fed bankers are scheduled today (Philip Jefferson and Loretta Mester, of fairly neutral persuasion). On the earnings calendar this week: Tencent, Alibaba, The Home Depot, Walmart, Allianz, Sony, Siemens AG and Compagnie Financière Richemont.

In Asia Pacific, red dominated in Sydney and Bombay at the start of the week. Hong Kong and Taiwan, on the other hand, gained 0.7%. Leading indicators are hesitant in Europe, with the Stoxx EU 600 flat. Wall Street futures are slightly up.

Today’s economic highlight:

The New York Federal Reserve’s monthly survey of consumers’ inflation expectations is today’s main indicator.

The dollar is slightly down, to EUR 0.9271 and GBP 0.7971. The ounce of gold rebounds to USD 2,340. Oil remains high, with North Sea Brent at USD 83.34 a barrel and US light crude WTI at USD 78.57. The yield on 10-year US debt reached 4.49%. Bitcoin is trading at USD 62,700.

In corporate news:

  • Chevron, Hess - U.S. Senate Democratic Majority Leader Chuck Schumer on Sunday called on the Federal Trade Commission (FTC) to cancel Chevron's proposed $53 billion acquisition of Hess.
  • Amazon will announce an investment of 1.2 billion euros and Microsoft will spend four billion euros as part of the Choose France 2024 summit.
  • In addition, Microsoft was ordered Friday evening in Delaware to pay $242 million to IPA Technologies in a patent dispute over its Cortana virtual assistant.
  • Arm Holdings, a subsidiary of the SoftBank conglomerate, plans to develop chips for artificial intelligence (AI) with the aim of launching the first products in 2025, the Nikkei Asia newspaper reported on Sunday. The stock was up 2.6% before the open.
  • Booking - The European Commission said on Monday it had designated Booking as a digital "gatekeeper," which will force it to comply with more rules.
  • Apple - Employees at the company's Towson, Maryland, store voted to authorize a strike, the AIM union said in a press release Saturday night.
  • Boeing - Late deliveries of Boeing planes are "extremely annoying" and cost Lufthansa a lot of money, but the American aircraft manufacturer should be able to solve these problems, the German airline's CEO said in an interview with the Swiss newspaper Neue Zürcher Zeitung.
  • GameStop jumped 18% in pre-market trading after the first tweet in three years from Keith Gill, known as "Roaring Kitty," was published on social network X. The iconic character's online messages helped spark a trading frenzy in shares of the 2021 video game distributor.

Analyst recommendations:

  • Avalonbay Communities, Inc.: Evercore ISI downgrades to in-line from outperform with a target price of USD 202.
  • Cisco Systems, Inc.: BNP Paribas Exane upgrades to neutral from underperform with a price target raised from USD 43 to USD 50.
  • Equity Residential: Evercore ISI downgrades to in-line from outperform with a target price of USD 70.
  • Msci, Inc.: Redburn Atlantic downgrades to neutral from sell with a price target raised from USD 405 to USD 485.
  • Constellation Energy Corporation: BMO Capital Markets maintains its outperform recommendation and raises the target price from USD 200 to USD 247.
  • Delta Air Lines, Inc.: HSBC initiates a Buy recommendation with a target price of USD 72.80.
  • Equifax Inc.: CIBC Capital Markets initiates a neutral recommendation with a target price of USD 6.
  • Mastercard, Inc.: Piper Sandler & Co initiates an overweight recommendation with a target price of USD 531.
  • Southwest Airlines Co.: HSBC initiates a Hold recommendation with a target price of USD 27.80.
  • United Airlines Holdings, Inc.: HSBC initiates a Buy recommendation with a target price of USD 69.20.
  • Visa, Inc.: Piper Sandler & Co initiates an overweight recommendation with a target price of USD 322.
  • Anglo American Plc: RBC Capital maintains its outperform recommendation and raises the target price from GBX 2300 to GBX 3100.
  • Johnson Service Group Plc: HSBC upgrades to buy from hold with a price target raised from GBP 1.43 to GBP 2.10.
  • TP Icap Group Plc: Canaccord Genuity maintains its buy recommendation with a price target raised from GBX 256 to GBX 326.
  • Royal Bank Of Canada: Jefferies upgrades to buy from hold with a price target raised from CAD 136 to CAD 157.
  • Sun Life Financial Inc.: Veritas Investment Research upgrades to buy from reduce with a price target raised from CAD 75 to CAD 76.