In the US, banking was also rocked, but less by European events than by Moody's decision to downgrade the credit rating of several secondary and tertiary financial institutions, while warning that larger institutions could be affected in the future. At the same time, the technology sector stalled. All in all, the S&P 500 and Dow Jones lost 0.4%, while the Nasdaq 100 gave back 0.9% last night. It's worth noting that all Western equity markets got off to a poor start following depressing Chinese import-export figures, a sign that world trade is in a shaky state. Today's new Chinese data is not great either.

Consumer prices in the country fell by -0.3% year-on-year in July, while producer prices contracted by -4.4%. On average, economists were aiming for -0.4% and -4% respectively. It remains to be seen whether the slightly smaller-than-expected decline will be enough to keep equity markets happy. In any case, the continuing deterioration in price trends raises fears of a plunge into deflation, with the specter of the Japanese situation of the early 1990s looming large. In theory, the answer to this problem lies in monetary expansion, but Chinese consumers and businesses are increasingly skittish, and the authorities are reluctant to launch deficit-financed support programs. Deflation has a downward spiral on a country's economy. If there is one positive lesson to be drawn from this, it is that the fall in prices in China will help to curb the excessive inflation raging in the Western world. However, it is yet another sign of China's poor economic health.

Another hot topic of the moment, and one that is sure to generate more and more ink, is the IPO of Arm, a key player in the semiconductor sector. The operation, orchestrated by current owner Softbank, is scheduled to take place in New York in September. Arm is a bit like the common property of the sector: the British company licenses a technology used by almost every player in the high-tech electronics sector. Nvidia had tried to buy the group, but the antitrust authorities vetoed the move. Softbank therefore opted for an IPO, but there's a lot of competition for a minority stake. Apple, Intel, Samsung Electronics, Nvidia, Amazon... they all want in, to prevent others from exerting too much influence on this jewel of the sector. There's no doubt that this IPO will make headlines in the coming weeks.

This morning, futures were slightly up as investors digested Chinese economic data and assess corporate results. Entertainment giant Walt Disney is due to report quarterly earnings after the closing bell.

Economic highlights of the day:

After Chinese inflation figures published this morning, US oil inventories are scheduled for 10.30am ET. The full agenda is here. 

The dollar is flat at EUR 0.9110 and GBP 0.7855. The ounce of gold is little changed at USD 1923. Oil rises slightly, with North Sea Brent at USD 86.76 a barrel and US light crude WTI at USD 83.17. The yield on 10-year US debt falls to 4%. Bitcoin trades at around USD 30,000.

In corporate news:

  • Walt Disney-owned television network ESPN and casino owner Penn Entertainment have agreed to jointly launch a sports betting business under the ESPN Bet brand in a $2 billion deal, they announced on Tuesday.
  • Lyft said on Tuesday that it would redouble its efforts to offer competitive prices in order to catch up with rival Uber. The prospect of a price war, which is taking precedence over solid earnings forecasts, is causing the Californian company's share price to fall by more than 7% in pre-market trading.
  • Take-Two expects lower-than-expected net sales for the second quarter, but has confirmed its full-year forecast and remains confident of seeing a "significant inflection point" in fiscal 2025.
  • Rivian raised its annual production forecast, and its CEO declared that the Group had sufficient liquidity to last until 2025. The share gained 1.8% in pre-market trading.
  • WeWork expressed "substantial" doubts on Tuesday about its ability to continue as a going concern and announced the departure of three members of its board of directors, sending its shares down 16.8% in pre-market trading.
  • Rocket Lab was up 7% in pre-market trading as the space company reported better-than-expected quarterly sales of $62.05 million.

Analyst recommendations:

  • Autonation:  Morgan Stanley raised the target on AutoNation Inc. to $117 from $105. Maintains underweight rating.
  • Celanese: J.P. Morgan analyst cut the recommendation to neutral from overweight. PT set to $122, implies a 2.7% decrease from last price.
  • Dish: Barclays raised the recommendation to equal-weight from underweight. PT set to $10, implies a 19% increase from last price.
  • Eli Lilly: Jefferies raised the recommendation on Eli Lilly & Co. to buy from hold. PT set to $615, implies a 18% increase from last price.
  • Haleon: Morgan Stanley remains Overweight with a price target reduced from 375 to 370 GBp.
  • Hikma: Barclays remains weighted in line with a price target raised from 1,800 to 2,175 GBp.
  • International Flavors: Goldman Sachs downgrades to neutral from buy. PT set to $78, implies a 20% increase from last price.
  • Tesla: Haitong International initiated coverage with a recommendation of outperform. PT set to $297.84, implies a 19% increase from last price.
  • UPS: UBS cut the recommendation on B shares to neutral from buy. PT set to $185, implies a 2.5% increase from last price.
  • Warner Music: Cowen cut the recommendation to market perform from outperform. PT set to $38, implies a 16% increase from last price.