On financial markets, last week saw the return of buying flows that erased part of the losses recorded since the start of the year. The rebound was fueled by the decline in oil, pro-growth statements from Chinese officials and investor sentiment that the risks associated with Ukraine are now priced in. As a result, $25.4 billion was invested in equities during the week, the largest positive flow in the last five weeks, while piles of cash were significantly reduced. The S&P500 gained 6.16%, or -6.36% since the start of the year.

Conflicting signals are always present. For example, stock markets rebounded strongly, but investors continue to wonder whether the Fed will create a negative chain reaction for growth by raising rates. On the other hand, they are almost as appalled by the shockwave of persistently high inflation. Powell's speech today should give them a few more cues on what the Fed will do next.

We also have mixed signals in Ukraine. Turkey hinted that the positions between Kyiv and Moscow towards a cease-fire had moved closer over the weekend. This does not prevent Russian troops from continuing their offensive, with the support of new equipment, and Ukrainian authorities from urging their population to resist, everywhere.

Another example of contradictory signals is bond markets, where we see a flattening of the US Treasury yield curve and even some portions that have inverted. This is a sign of the confusion of operators. The pessimists among us will point out that an inverted yield curve is often followed by a recession…

This is the environment we're in right now: bad news is piling up, but the correction seen at the beginning of the year and the bits of positive announcements are enough to bring investors back. They went shopping last week on stocks that have been decimated in the last few weeks, according to the good old beta method (not the investor, the ratio): what has corrected the most will go up the most during the trend reversal phase. In particular, unprofitable technology stocks listed on Wall Street or Chinese companies targeted by the Communist Party. Or, even better, the combination of the two: we thus obtain a gain of 116% in one week for Didi, the "Chinese Uber" listed on the Nasdaq.

The rise in oil prices to around USD 110 per barrel and the lack of monetary stimulus in China are causing more caution this morning. Investors were hoping that China would step up its game after having clearly softened its repressive stance towards financial markets last week. For example, by easing its financing conditions from Monday. But the PBOC, the Chinese central bank, opted for the status quo. As for commodities, they are once again agitated by rumors of discussions of an embargo on Russian oil between Western nations and Australia's decision to ban the export of aluminum to Russia.

Europe is at the heart of Joe Biden's agenda this week. POTUS will hold talks with the Scholz, Draghi, Johnson and Macron quartet today, before coming to Brussels on Thursday and visiting Poland on Friday. Ukraine and Russia will of course be at the center of the discussions. A visit with strong symbolic value, which Vladimir Putin will probably appreciate.

 

Today's economic highlights:

The Chicago Fed's activity index is today's main indicator.

The dollar index is unchanged at 12303.72. Gold ounce is stable at USD 1935. Oil remains firm with North Sea Brent at USD 113.92 and US light crude WTI at USD 110.15. US debt yields at 2.15% over 10 years, while German debt offers a coupon of 0.37% over the same duration. Bitcoin is trading at USD 41,195.

 

On markets:

* The Boeing Company- A China Eastern Airlines jetliner crashed Monday with 132 passengers on board in the mountains of southern China, the Civil Aviation Administration of China (CAAC) said. The number of possible casualties is unknown at this time, Chinese state television reported, saying the crashed plane was a Boeing 737.

* Berkshire Hathaway - Warren Buffett's company announced Monday that it intends to buy Alleghany Corporation, an insurance specialist, in an all-cash deal valued at $11.6 billion, representing a premium of more than 25 percent over its target's Friday closing price.

* Anaplan- The cloud software company announced on Sunday its intention to delist from the stock market in connection with its acquisition by the investment fund Thoma Bravo for $ 9.65 billion, representing a premium of more than 30% over its closing price on Friday. Anaplan shares jumped 26.7 percent in premarket trading Monday.

* Nielsen Holdings announced Sunday that it had rejected a $9.1 billion offer from a private equity consortium, saying the proposal did not reflect the value of the group. Nielsen's stock is down 16.4% in pre-market trading.

* Tesla- The driver of the Tesla Model 3 involved in a fatal accident last December in Paris has filed a lawsuit against the U.S. automaker, his lawyer said Sunday.

* General Motors - General Motors shares fell 0.85 percent after the automaker announced Friday that it would buy SoftBank's stake in Cruise, GM's self-driving car subsidiary, for $2.1 billion.

* Meta Platforms - Facebook's parent company filed a lawsuit in a Russian court on Monday, unsuccessfully challenging its inclusion by Russian authorities in the list of "extremist organizations," the RIA news agency reported.

* Microsoft- The U.S. technology giant announced that a Chinese government agency has ordered it to suspend for seven days the automatic suggestion features of Bing, the last major foreign Internet search engine authorized in China.

* Baker Hughes announced on Sunday that it would suspend all new investments in Russia amid the war between Moscow and Kyiv. Halliburton and Schlumberger made similar announcements Friday night.

* Parker-Hannifin - The U.S. engineering and aerospace company has offered concessions to get the European Commission's green light for its proposed 6.3 billion pound takeover of British rival Meggitt, a European executive notice showed Monday.

* Walt Disney - Shanghai's Disneyland park announced Sunday its intention to close until further notice due to an outbreak of new Covid-19 contaminations in China.

* Moderna- The U.S. company announced Monday that it has signed a new agreement with Switzerland to supply seven million doses of its Covid-19 vaccine in 2023 as part of a vaccine booster.

 

Analyst recommendations:

  • Air Products: J.P. Morgan raised the recommendation to overweight from neutral. PT up 19% to $275.
  • Alleghany: Keefe, Bruyette & Woods initiated coverage with a recommendation of outperform. PT set to $815.
  • Armstrong: Jefferies upgrades to buy from hold. PT up 20% to $111.
  • Associated Banc-Corp: Wells Fargo Securities upgrades to overweight from equal-weight. PT up 19% to $28.
  • Balfour Beatty: Morgan Stanley downgrades from Overweight to Underweight targeting GBp 230.
  • Check Point Software: Piper Sandler downgrades to underweight from neutral; price target is $130.
  • Commerce Bancshares: Wells Fargo lifts to equalweight from underweight, price target to $70 from $60.
  • Equinix: Citigroup reinstates at buy with $950 price target
  • Fortune Brands: Jefferies downgrades fortune brands home & security to hold from buy.
  • Funding Circle: Berenberg initiates a Buy rating, targeting GBp 120.
  • Greggs: Jefferies remains Buy with a price target reduced from GBp 3400 to GBp 3250.
  • Hargreaves Lansdown: Jefferies downgrades from Hold to Underperform, targeting GBp 820.
  • Old Second Bancorp: D.A. Davidson & Co upgrades to buy from neutral. PT up 61% to $22.
  • Playtika: Citigroup reinstates at neutral with $20 price target
  • Secure Trust Bank: Berenberg starts tracking as Buy, targeting GBp 1820.
  • St. James's Place: Jefferies starts tracking as a Buy, targeting GBp 1740.
  • Tesla: Jefferies research considers the stock attractive and recommends it with a Buy rating. The target price is lowered from USD 1400 to USD 1250.
  • United Natural: CL King & Associates initiated coverage  with a recommendation of buy. PT set to $52.