Last week ended in the red for Wall Street. Since January 1, the Dow Jones lost 8.7%, and the Nasdaq 100 a whopping -18.5%. The decline of the Nasdaq is an excellent indicator of the current risk aversion of investors. We can also use Cathie Wood's Ark Innovation ETF as an inverted bellwether of the market's appetite for bold investments: with a price down to $55.5, it's at -41% year-to-date. Companies with exuberant multiples continue to get slashed, while the coming reduction in liquidity will force investors to be more selective in the quality of the issues they back.

Markets continue to move according to any announcement about diplomatic talks between Ukraine and Russia. The resumption of talks between the two countries and the planned meeting between two senior American and Chinese diplomats are helping to anchor the leading indicators in the green.

Meanwhile, banking stocks are rising ahead of a Federal Reserve meeting on Wednesday. This has been talked about for months now, and we have almost forgotten that the US central bank has not yet officially launched a policy designed to fight inflation by raising key interest rates, which is supposed to gradually reduce the quantity of money in circulation. The Fed will meet over two days starting Tuesday and will therefore give its verdict on Wednesday. A 25 basis point rate hike is widely expected, but this is only the start since it should be followed by a series of increases throughout the year. Economists are wondering how long it will take to get inflation back under control.

Another event that investors will monitor this week is the surge in Covid cases in China, which could further upset already fragile supply chains.

 

Economic highlights of the day:

The only major economic indicator of the day will be the January industrial production figures for the Euro zone.

The dollar is down towards EUR 0.9118. The ounce of gold is losing some ground at USD 1956. Oil is still volatile, with North Sea Brent at USD 105.08 and US WTI light crude at USD 101.32. US debt yields are again above the 2% mark at 2.01% on 10-years, and the Bund is steady at 0.24%. Bitcoin is hovering around USD 38,500.

 

On markets:

* Elon Musk said Sunday that Tesla is facing significant inflation in raw materials and logistics.

* Lockheed Martin - Germany has made a decision in principle to buy Lockheed Martin F-35 fighter jets to replace its aging Tornado fleet, two government sources said. Lockheed Martin shares gained 1.7 percent in premarket trading.

* Apple supplier Foxconn announced Monday that it has suspended operations in Shenzhen, China, due to restrictions related to the Covid-19 outbreak.

* Bank of America gained 2.3% in pre-market trading after the yield on 10-year U.S. Treasuries hit its highest level since July 2019 at 2.10% on the prospect of a 25 basis point rate hike by the U.S. Federal Reserve on Wednesday.

* Telecom Italia's (TIM) board of directors announced Sunday night that it has opened discussions with KKR to evaluate a potential €10.8 billion buyout offer made by the U.S. fund in November.

Meta Platforms further warned Instagram users in Russia on Sunday that the service would no longer be operational in the country as of midnight.

* Ford Motor- South Korean battery maker SK On announced on Monday that it has signed a memorandum of understanding with the U.S. automaker and Koc Holding to set up a joint venture to produce batteries for electric vehicles in Turkey with an annual capacity of 30 to 45 gigawatt hours (GWh). Ford will also strengthen its partnership with Volkswagen in electric vehicles with the production of a second model that will be based on the MEB platform of the German group.

* JD.Com - The Chinese online retail giant listed on Wall Street fell 6.2% in pre-market trading after announcing that its Hong Kong subsidiary had bought the logistics group Deppon Logistics for a total amount of about nine billion yuan.

* Novavax - The U.S. drugmaker's COVID-19 vaccine, touted as an alternative for people reluctant to take messenger RNA vaccines, has gotten off to a slow start in key European Union countries, health agency data show.

 

Analyst recommendations:

  • Chevron: Morgan Stanley cut the recommendation to equal-weight from overweight. PT down 2.9% to $166.
  • Enova International: Janney upgrades to Buy from Neutral, adjusts fair value estimate to $49
  • IPG Photonics: Raymond James downgrades to underperform from market perform.
  • LTC Properties: RBC Capital Markets upgrades to sector perform from underperform. PT up 3.4% to $37.
  • Northern Oil and Gas: Wells Fargo downgrades  to equalweight from overweight; price target is $34
  • Ocado: Jefferies remains Hold with a reduced target of GBp 1,850 to GBp 1,300.
  • Occidental Petroleum: Morgan Stanley downgrades to equal-weight from overweight. PT down 10% to $52.
  • Olin: KeyBanc upgrades to overweight from sector weight, assigns $64 price target
  • Omnicom: Barclays downgrades to equal-weight from overweight. PT up 18% to $90.
  • Pearson:  Societe Generale upgrades to buy from hold. PT up 14% to 875 pence.
  • Reckitt: Bernstein upgrades from Market Perform to Underperform targeting GBp 5300.
  • Shake Shack: Wedbush cut the target on Shake Shack Inc. Class A to $83 from $100. Maintains outperform rating.
  • The Interpublic Group: Barclays downgrades to equal-weight from overweight. PT up 27% to $42.
  • Tyler Tech: Barclays initiated coverage with a recommendation of equal-weight. PT up 12% to $445.
  • Tyson Foods: BMO Capital Markets downgrades to market perform from outperform. PT up 13% to $99.
  • Unilever: Bernstein revises its recommendation upwards and now adopts a neutral opinion. The target price is decreased from GBp 3500 to GBp 3300.
  • Wizz Air : Citigroup remains Sell with a reduced price target of GBp 3500 à GBp 2300.
  • WPP: Barclays moves from Overweight to Equal-weight with a GBp 1250 target.