Two Fed members have said that the central bank may soon review its policy, but another has said the opposite. Two major US investment banks think the US economy will escape recession, but one of their competitors wrote that economic contraction is coming.

Economists believe that Friday's monthly US jobs report is positive for the path of key rates because job creation is less robust than expected. But some peers noted that hourly wages rose and the unemployment rate fell.

I think it's fair to conclude that no one has any certainties, and that everyone is just making plausible assumptions.

What is certain is that Friday's session ended higher in Europe and lower in the United States. On Wall Street, the employment report was initially well received for its "rate hikes are paying off, so the Fed won't have to raise them again" effect. But the rest of the session didn't go so well, and the S&P500 and Nasdaq closed down 0.5%. Even Apple and Amazon were at odds on Friday. The former lost 4.8% following mixed results, which pushed its capitalization below the $3,000 billion mark. Amazon made up for this by soaring 8% after a stronger-than-expected quarter.

Now it's getting a little more technical (and even less understandable). US bond yields surged last week, approaching their November peaks. But they deflated on Friday. This was despite the fall in Wall Street equities, which seemed to endorse the rather negative reading of the employment figures for monetary policy. The US 10-year is at 4.06% this morning, compared with 4.20% three days ago. The market still doesn't believe in another Fed rate hike in September, and doesn't have much faith in one by the end of the year either. Looking at futures contracts, the probability of another rate hike in 2023 is just under 40%. I'll say it again: one of the most powerful drivers of the global equity rally is the return to a more business-friendly monetary cycle, i.e. with a falling cost of money.

And just as well, financial analysts will have another opportunity to argue over their analysis of the situation this week, with the return of price statistics. US inflation for July will be published on Thursday, before producer prices on Friday. Before that, on Wednesday, China will have released its consumer price data. As we wrote in MarketScreener's weekly update at the end of last week, the two economic powers have very different problems to deal with. Beijing faces the threat of problematic deflation, while Washington fears a reacceleration in price rises after the lull of recent months.

On the corporate front, quarterly earnings releases continue, albeit at a less frantic pace than in the previous fortnight. Eli Lilly, United Parcel Service, Zoetis and Walt Disney are due to report. In the United States, 84% of S&P500 companies have already revealed their figures. The overall picture remains unchanged (I'm getting the data from FactSet): companies are facing their biggest year-on-year earnings contraction since Q3 2020, but they're beating analysts' projections (who tend to be over-pessimistic in phases of doubt, let's not forget). Mediocre in absolute terms, but good in relative terms, so to speak.

Wall Street futures were higher on Monday as investors digest inflation numbers, interest rates and corporate results. The focus is on the consumer price index (CPI) for July on Thursday.

Economic highlights of the day:

German industrial production for July is the only major statistic of the day. The full agenda is here.

The dollar is up 0.2% against the euro to EUR 0.9107 and is flat against the pound to USD 0.7849. The ounce of gold is stable at USD 1934. Oil is slightly down, with North Sea Brent at USD 85.63 a barrel and US light crude WTI at USD 81.90. The yield on 10-year US debt has eased slightly to 4.06%. Bitcoin is trading at around USD 29,000.

In corporate news:

  • Berkshire Hathaway reported record quarterly earnings on Saturday, while gains on shares led to an overall profit of nearly $36 billion. Shares were up 1.5% before the opening.
  • Icahn Enterprise said on Friday it had been contacted by the Securities and Exchange Commission, the US stock exchange regulator, which is seeking information on the company. Shares fell 3.3% after the close.
  • KKR plans to launch a tender offer for all listed shares in German space technology company OHB, according to the company, representing an investment of up to 338 million euros.
  • Yellow fell by 25% before the opening after the trucking company filed for Chapter 11 bankruptcy protection.

Analysts recommendations:

  • AstraZeneca: Morgan Stanley remains weighted in line with a price target raised from GBp 12,600 to GBp 12,700.
  • BAE Systems: Deutsche Bank remains Buy with price target raised from GBp 1090 to GBp 1140.
  • Ormat: Roth MKM upgrades to buy from neutral. PT up 20% to $92.
  • Rolls-Royce: J.P. Morgan upgrades from Underweight to Neutral, targeting GBp 235.
  • SouthWest Airlines: Redburn downgrades to sell from neutral.
  • United Airlines:  Redburn upgrades to buy from neutral.
  • WPP: Macquarie remains neutral with a price target reduced from GBp 1050 to GBp 850.