This morning were published the so-called “PCE” inflation figures for April. This corresponds to prices paid by consumers in the United States, making it a highly prized indicator for the Fed's rate policy, even if it comes late in the month. The pattern is much the same as usual: if PCE inflation is weaker than expected, or if one of its major components is weaker than expected, investors will feel that the likelihood of the US central bank cutting rates will increase, and equities will rise. In the opposite case, the week's fears are likely to be amplified and equities will retreat, while bond yields will come back to tickle their highs.

Let's dispel the suspense: PCE inflation met expectations. US household income increased by 0.3% month-over-month in April, matching the consensus, after a 0.5% rise in March. Personal Consumption Expenditures (PCE) went up by 0.2%, which was slightly below the anticipated 0.3% and down from the 0.8% increase seen in the previous month. The PCE inflation index saw a month-over-month increase of 0.3%, surpassing the predicted 0.2%. Year-over-year, the index climbed by 2.7%, aligning with expectations. The core PCE price index gained 0.2% month-over-month, which was below the 0.3% consensus, and by 2.8% year-over-year, meeting market predictions.

To be totally objective, PCE inflation is in a favorable ballot. In other words, the latest warning signs are in its favor, such as the inflation component of Q1 US GDP, a new estimate of which was released yesterday. That said, it wasn't enough to cheer up Wall Street yesterday. Even with the help of New York Fed President John Williams, who said he expected inflation to continue falling.

In New York, the Nasdaq 100 lost over 1%, the Dow Jones 0.9% and the S&P500 some 0.6%. The latest poorly-received earnings reports weighed heavily in the balance: -20% for Salesforce, -12% for Servicenow, -10% for Agilent! It was a bizarre session, to say the least, since at the same time, the Russell 2000, the broad index of US SMEs, gained 1%. As for the stars of the stock market, the “Magnificent Seven” once again split into two groups, but to the benefit of the year's two ugly ducks, Apple and Tesla. Apple and Tesla outperformed, while the others contributed to the decline in the technology segment.

Europe was also a bit of a mess, but mostly green. The old continent had taken a nosedive the previous day, particularly in France. So, with the exception of Benelux, where the Dutch AEX was weighed down by the poor performance of its semiconductor champions, the Belgian Bel20 once again paid in cash for the 4% drop in ArgenX, one of its highest weightings.

In other news, Eurozone inflation for May was also published this morning, which rose a bit (German inflation, already known, had surprised on the upside). This should not call into question the ECB's planned rate cut next week.

Meanwhile, a jury found Donald Trump guilty of multiple offenses in his corruption trial, making him the first former US president to be so convicted. At this stage, this should not prevent him from running for the presidency, even if he were to be sentenced to prison before the November 5 election.

In China, official PMI indicators surprised on the downside in May, whereas the latest statistics were pointing more towards an upturn. The Chinese manufacturing PMI even fell back into contraction (49.5 points in May), whereas the market had been hoping for an acceleration. New orders, particularly for exports, explain the weakness. The services indicator, while not falling back into negative territory, was also weaker than expected.

The United States authorized Ukraine to use American weapons to strike certain targets within a specific zone of Russian territory. On another front, Washington has decided to tighten up the rules governing the export of advanced processors to the Middle East, fearing that China could benefit from a circuitous route. The Wall Street Journal devotes an article to the “axis of evasion”, the alternative ecosystem created by several countries, including China, Russia and Iran, following Western sanctions against certain countries. It's a perfect illustration of how geopolitics and international trade are changing.

Asia-Pacific markets rebounded at the end of the week, after several hectic sessions. The Nikkei 225 gained 1% after three sessions in the red. China is recovering sluggishly, both on the mainland (+0.1% for the CSI300) and in Hong Kong (+0.6% for the Hang Seng). South Korea, Australia and India are also back in positive territory after a series of declines. The Bombay Stock Exchange, if the rebound is confirmed, would put an end to five consecutive declines. European markets and futures on Wall Street are in the green.

Today's economic highlights

The May Eurozone consumer price index, April PCE inflation in the US, personal income and household consumption and the Chicago PMI are on the agenda

The dollars is worth EUR 0.9215 and GBP 0.7867. The ounce of gold remains under pressure at USD 2343. Oil retreats sharply, with North Sea Brent at USD 81.87 a barrel and US light crude WTI at USD 77.69. The yield on 10-year US debt eases to 4.54%. Bitcoin is trading at USD 68,200.

In corporate news:

  • Dell Technologies plunges around 14% in pre-market trading after reporting above-consensus first-quarter sales on Thursday, buoyed by growing demand for its AI-powered servers.
  • Gap jumps 25% in pre-market trading after raising its annual sales forecast, while its first-quarter results beat consensus, boosted by the strength of its Old Navy and Gap brands.
  • Marvell Technology - The chipmaker reported below-consensus first-quarter sales on Thursday, penalized by weak customer spending. The stock lost 4% after the close.
  • Trump Media & Technology Group plunged 8% in pre-market trading after former President Donald Trump was found guilty on criminal charges in the Stormy Daniels affair.
  • Biogen said Thursday that the European Commission had granted marketing authorization to its Qalsody drug for amyotrophic lateral sclerosis (ALS).
  • Gilead Sciences said on Thursday that its drug Trodelvy, tested in bladder cancer patients who had already received chemotherapy, had failed to meet the primary endpoint of a late-stage study.
  • Zscaler forecast above-consensus sales and earnings for the fourth quarter, as companies spend more on cybersecurity and network solutions. The stock gained 14% before the opening.
  • NetApp reported above-consensus revenues for the fourth quarter, thanks to strong demand for its data management services, while the company also approved a new $1 billion share buyback plan.
  • Hertz Global is considering its options for raising capital, Bloomberg News reported.
  • Costco Wholesale reported better-than-consensus third-quarter sales, as consumers flocked to its stores to buy low-priced food and convenience items.
  • Nordstrom warned Thursday of an uncertain economy and said consumers were more selective, as the department store chain maintained its annual sales and earnings forecasts.
  • SentinelOne - The cybersecurity company lost 13.2% after the close after lowering its revenue forecast for the fiscal year to $808-815 million, from $812-818 million previously.

Analyst recommendations:

  • Fifth Third Bancorp: Wolfe Research upgrades to outperform from peerperform with a target price of USD 43.
  • Hormel Foods Corporation: JP Morgan upgrades to neutral from underweight with a target price raised from USD 28 to USD 29.
  • Humana Inc.: Baptista Research downgrades to underperform from hold with a price target reduced from USD 550 to USD 390.
  • NetApp, Inc.: JP Morgan upgrades to neutral from underweight with a target price raised from USD 95 to USD 125.
  • Dell Technologies Inc.: Melius Research LLC maintains its buy recommendation and raises the target price from USD 152 to USD 186.
  • First Solar, Inc.: ROTH MKM maintains its buy recommendation and raises the target price from USD 230 to USD 320.
  • MongoDB, Inc.: Baird maintains its outperform recommendation and reduces the target price from USD 450 to USD 305.
  • Qualcomm, Inc.: Mizuho Securities maintains its buy recommendation and raises the target price from USD 180 to USD 240.
  • Ulta Beauty, Inc.: Evercore ISI maintains its outperform rating and reduces the target price from USD 630 to USD 500.
  • PayPal Holdings, Inc.: New Street Research LLP initiates a Buy recommendation with a target price of USD 80.
  • Alphawave IP Group Plc: Jefferies downgrades to hold from buy with a price target reduced from GBX 270 to GBX 155.
  • Assura Plc: Shore Capital downgrades to hold from buy.
  • Centrica Plc: RBC Capital upgrades to outperform from sector perform with a price target raised from GBX 145 to GBX 170.
  • Intercontinental Hotels Group Plc: AlphaValue/Baader Europe downgrades to reduce from sell with a price target raised from GBX 7197 to GBX 7243.
  • Quilter Plc: Citi upgrades to neutral from sell with a price target raised from GBP 0.93 to GBP 1.