It seems that things are starting to change on stock markets. I can see the start of a shift. Last Friday, three events contributed to boost Wall Street's indexes, suggesting that the Fed could start to ease its stance by 2023. The first one was an article by influential Wall Street Journal reporter Nick Timiraos, who roughly explained that the Fed was not going to risk imploding growth by taking the extra step. Timiraos has a large following and it is rumored in authorized circles that the US central bank likes to use him as its preferred conduit when it has a message to get across. Alongside this article, San Francisco Fed boss Mary Daly explained Friday that the central bank would eventually moderate its rate hikes to avoid making a blunder. She had said just about the opposite earlier this month, arguing that the Fed was going to keep the pressure on. Let's not forget the statements of James Bullard, the head of the St. Louis Fed, which were along the same lines.

Was it a coincidence that this all happened on Friday? I don't think so. And neither did the American market: the S&P500, the Dow Jones and the Nasdaq recovered more than 2% over the session and between 4.7 and 5.8% over the week.

In China, Xi Jinping is emerging stronger from the 20th Communist Party Congress, which ended with a number of symbols, such as the disappearance of several moderate leaders in favor of Xi's close guard. And there was a curious scene that included former president Hu Jintao, who was dragged out of the congress hall by two apparatchiks before the ceremony was over.

In the UK, after Friday's resignation of British Prime Minister Liz Truss, the Conservative Party has started the process to select a new leader, with nominations open until today.

Chancellor Rishi Sunak, leader of the house Penny Mordaunt, and former PM Boris Johnson were in the race this week-end. However, Johnson's bid quickly faded. Yesterday, after hours spent on the phone trying to convince Tory MPs to support him, he officially bowed out of the race.

If Penny Mordaunt also withdraws from the race, Mr. Sunak could be appointed prime minister within the next few hours.

 

Economic highlights of the day:

The first PMI activity indicators for October will be published for the major economies, including the US. All the macro agenda is here. Last night, China announced that its Q3 GDP grew by 3.9%, which is above the consensus (3.3%). On the other hand, retail sales rose only 2.5%, below expectations.

The dollar rose 0.4% to EUR 1.0187 and GBP 0.8858. The ounce of gold recovered to USD 1649. Oil is down, with North Sea Brent crude at USD 90.4 per barrel and U.S. WTI light crude at USD 84.05. The yield on 10-year US debt is coming down a bit to 4.17%. Bitcoin remains stuck in the 19,000 / 19,500 dollars per unit area.

 

In corporate news:

* Tesla was down 3.5% in pre-market trading as the U.S. automaker lowered its Model 3 and Y prices for the first time in China this year, raising fears among some analysts that a price war is beginning.

* Wall Street-listed Chinese companies Alibaba, Baidu, Weibo, Tencent Music, Pinduoduo and Bilibili fell 9% and 15% in premarket trading after President Xi Jinping was reappointed to a third term as head of the Chinese Communist Party by a committee whose ideological vision could trump economic growth.

* Goldman Sachs announced Monday that it is forming a joint venture in China with local logistics company Sunjade in an effort to boost investment in real estate and infrastructure assets in the country.

* Mattel - The California-based toymaker agreed to pay $3.5 million to close a dispute with the Securities and Exchange Commission (SEC), the U.S. securities regulator, over financial disclosures in 2017.

 

Analyst recommendations:

  • AMD: HSBC initiated coverage with a recommendation of hold. PT set to $60.
  • Analog Devices: Barclays downgrades to equal-weight from overweight. PT down 4.5% to $140.
  • AT&T: Raymond James upgrades to strong buy from outperform, while DA Davidson cuts price target to $20 from $21 and reiterates buy/add rating.
  • Big Yellow: HSBC upgrades from hold to buy targeting GBp 1250.
  • BP Plc: HSBC upgrades from hold to buy targeting GBp 530.
  • Chevron: HSBC downgrades to hold from buy. PT up 2.2% to $177.
  • Green Plains: BMO Capital Markets downgrades to market perform from outperform. PT up 6.8% to $31.
  • Heico:  RBC Capital Markets upgrades to outperform from sector perform. PT up 15% to $175.
  • Intel: HSBC initiated coverage with a recommendation of reduce. PT set to $23.
  • Land Securities: HSBC upgrades from hold to buy targeting GBp 648.
  • Pearson: Numis Securities upgrades to hold from reduce. PT up 3.5% to 960 pence.
  • Qualcomm: HSBC initiated coverage with a recommendation of buy. PT set to $180.
  • Silicon Lab: Barclays downgrades to underweight from equal-weight. PT down 24% to $95.
  • NXP Semi: Barclays downgrades to equal-weight from overweight. PT down 3.6% to $140.
  • Texas Instruments: Barclays upgrades to equal-weight from underweight. PT down 6.1% to $150.
  • The British Land: HSBC upgrades from hold to buy targeting GBp 386.
  • Williams-Sonoma: Jefferies downgrades to underperform from hold. PT down 15% to $100.
  • Wolfspeed: J.P. Morgan upgrades to overweight from neutral. PT rises 51% to $160.