Most equity indices gained ground last week, with the British FTSE being a notable exception. The MSCI World index, covering major global markets, is up 18%, while the US S&P 500 is nearing a 22% increase. However, the MSCI China index leads the pack with a 26% rise, fueled by optimism that Beijing will take necessary steps to rejuvenate the Chinese economy. This belief is supported by a series of promising initial announcements.

Despite this financial optimism, there's relentless pressure on Chinese authorities to prove the effectiveness of their recovery strategy. Investors' insatiable appetite for positive news has led to a cycle of announcements, reflecting a somewhat unhealthy dynamic of overreacting to market expectations.

In the last 72 hours, investors had high hopes for a press conference by the Finance Minister on Saturday. Rumors suggested consumer support measures might be announced. However, Lan Fo'an only reiterated the real estate support program and mentioned budget flexibility for further actions. The response was lukewarm, especially as recent statistics from Beijing seemed repetitive. September's inflation was below expectations, and producer prices fell more than anticipated, indicating a growing deflationary threat. Deflation is an economist's nightmare, difficult to combat without adverse side effects.

Shifting focus from China, this week's trend will be set by quarterly corporate results. On Wall Street, JPMorgan and Wells Fargo's results were well-received, suggesting confidence in a "soft landing" for the US economy. This week, the sector scope broadens with results from UnitedHealth, Johnson & Johnson, Abbott, Prologis, Crown Castle, Netflix, Procter & Gamble, Goldman Sachs, and American Express. In Europe, LVMH, Nestlé, Rio Tinto, and EssilorLuxottica are on the horizon.

In other news, tensions have flared again between the UN and Israel, following incidents with UNIFIL in Lebanon, where several peacekeepers were injured amid the Israeli army's offensive. In a remarkable engineering feat, SpaceX successfully caught a space launcher with giant clamps.

On the macroeconomic front, Thursday, October 17, is significant with the ECB's rate decision (likely a quarter-point cut) and the release of September US retail sales data. Japanese and Canadian markets are closed on Monday for a public holiday. In the US, Wall Street is open for Columbus Day, but the bond market is closed, likely leading to limited activity.

In the Asia-Pacific region, Chinese equities' fluctuations reflect investor caution following recent announcements. Before midday, Hong Kong was down while mainland markets saw moderate gains. Post-break, the CSI300 extended gains by over 2%, and the Hang Seng turned positive. Australia, India, and Taiwan ended in the green, while South Korea dipped 0.2%. As mentioned, the Tokyo Stock Exchange is closed. European markets are trading around breakeven, and Wall Street futures are mixed, hovering around zero.

Economic highlights:

The dollar is worth EUR 0.9163 and GBP 0.7665. The ounce of gold is at USD 2,652. Oil fell, with North Sea Brent at USD 77.35 a barrel and US light crude WTI at USD 73.58. The yield on 10-year US debt is up to 4.13%. Bitcoin is worth USD 64,780.

In corporate news:

  • Boeing is down after announcing a 10% global workforce cut, or about 17,000 jobs, and warning of widening losses due to a strike by its main U.S. union. The launch of its 777X model has been delayed again, now expected in 2026.
  • Tesla recovering slightly from a nearly 9% drop on Friday, as investors remain skeptical about the commercial prospects of its future robotaxi.
  • Berkshire Hathaway increased its stake in Sirius XM Holding by 3.6 million shares, now holding a 32% stake in the satellite radio company.
  • The FDA is reportedly considering reversing its ban on generic versions of Eli Lilly's weight-loss drugs .
  • FDA approves Pfizer treatment for certain types of hemophilia in the US.
  • Fisker bankruptcy plan approved after agreement on technical support for vehicles.

Analyst recommendations:

  • Applovin Corporation: Goldman Sachs downgrades to neutral from buy with a price target raised from USD 103 to USD 150.
  • Aptargroup, Inc.: Jefferies upgrades to buy from hold with a price target raised from USD 155 to USD 215.
  • Caterpillar Inc.: Morgan Stanley downgrades to underweight from equal weight with a price target reduced from USD 349 to USD 332.
  • Duolingo, Inc.: JMP Securities downgrades to market perform from market outperform.
  • Keycorp: Baird downgrades to neutral from outperform with a price target reduced from USD 18 to USD 17.
  • Newell Brands Inc.: Baptista Research downgrades to hold from outperform with a price target raised from USD 7.90 to USD 8.40.
  • Polaris Inc.: Baptista Research downgrades to hold from outperform with a price target reduced from USD 96 to USD 91.
  • Sentinelone, Inc.: Piper Sandler & Co upgrades to overweight from neutral with a price target raised from USD 25 to USD 32.
  • Tesla, Inc.: President Capital Management Corp downgrades to neutral from buy with a target price reduced from USD 255 to USD 245.
  • V.F. Corporation: Wells Fargo downgrades to underweight from equalweight with a price target reduced from USD 16 to USD 15.
  • Walt Disney Company (The): Cmb International Capital Corp Ltd drops coverage on the stock.
  • Allison Transmission Holdings, Inc.: Morgan Stanley maintains its market weight recommendation and raises the target price from 84 to USD 103.
  • Atlassian Corporation: Wolfe Research maintains its outperform recommendation and raises the target price from USD 195 to USD 240.
  • Cummins Inc.: Morgan Stanley maintains its overweight recommendation and raises the target price from USD 341 to USD 425.
  • Lam Research Corporation: BNP Paribas Exane maintains its neutral recommendation with a price target reduced from 867 to USD 86.70.
  • Nextracker Inc.: BMO Capital Markets maintains its market perform recommendation with a price target reduced from 56 to USD 44.
  • Roblox Corporation: CITIC Securities Co Ltd maintains its buy recommendation and raises the target price from USD 37 to USD 51.
  • SBA Communications Corporation: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 230 to USD 280.
  • The Trade Desk, Inc.: Stifel maintains its buy recommendation and raises the target price from USD 111 to USD 136.
  • Wynn Resorts, Limited: Jefferies maintains its hold recommendation with a price target raised from USD 81 to USD 115.
  • Bunzl Plc: JP Morgan upgrades to overweight from neutral with a target price raised from GBP 36.60 to GBP 39.80.
  • Flutter Entertainment Plc: Wells Fargo upgrades to overweight from equalweight with a target price raised from USD 224 to USD 295.
  • TI Fluid Systems Plc: Investec downgrades to hold from buy with a target price reduced from GBX 240 to GBX 200.
  • TC Energy Corporation: JP Morgan upgrades to overweight from neutral with a target price raised from CAD 64 to CAD 69.