Investors have been eagerly awaiting the U.S. Personal Consumption Expenditures (PCE) inflation data, hoping for insights into the Federal Reserve's next moves. The Fed's recent monetary easing aims to bolster employment while keeping inflation in check. A higher-than-expected PCE could have complicated the Fed's efforts to lower rates without sparking inflation. However, today's reading was lower than expected, suggesting a quicker path to easing. The PCE price index for August increased by just 0.1%. Excluding food and energy, the core PCE price index also rose by 0.1%, falling short of the 0.2% increase anticipated by Bloomberg's consensus. On an annual basis, it gained 2.7%, meeting expectations. Personal spending in August rose by 0.2% month-over-month, slightly below the expected 0.3%. The market welcomed these figures. Futures on the main Wall Street indices shifted from flat to about +0.2% after the release.

What a week it has been! The stock markets received an unexpected boost from China. Beijing's stimulus measures have reignited investor enthusiasm, particularly benefiting luxury goods stocks, which are now recovering from their slump. On Wall Street, records are being shattered. The market indicators are so positive that one might start to wonder where the next piece of bad news will come from.

Yesterday was a bonanza for certain markets, especially those with strong ties to China. In Europe, the French CAC40 led the charge. Elsewhere, the session was positive, though less exuberant, with euphoria seemingly just around the corner. Most indices rose as investors finally found Beijing's announcements convincing in their effort to revive a sluggish economy. There's still work to be done, but the political and financial sectors seem aligned, thanks to a robust, pro-market statement from the Chinese politburo. A few months ago, I mentioned the three driving forces behind the rise in equities: AI, falling US interest rates, and the Chinese awakening. All three are now in full swing, explaining the financiers' huge appetite for risk. The S&P 500 and Dow Jones set new records. The S&P 500's gains were largely driven by its star performers: Bloomberg calculated that 85% of September's gains were attributable to the "Magnificent Seven" (Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla). European gains ranged from 0.2% for the FTSE 100 to 1.2% for the MSCI Europe and 2.33% for the French CAC40. Chinese indices are having their best week since 2008. The MSCI China gained 6% yesterday, 5% on Tuesday, and is poised to gain a further 4% today. Both mainland indices and Hong Kong are enjoying the rally. The MSCI China's last decline was on September 11, 11 sessions ago.

On the macro front, Jerome Powell's speech yesterday was a non-event. The Fed chair chose not to comment on monetary policy. The economy is holding up well, the market celebrated last week's double rate cut, and the fall in oil prices is improving the inflation outlook. Why complicate matters? In Japan, Shigeru Ishiba is the new Prime Minister, which led to a rebound in the yen. In the Asia-Pacific region, only South Korea lost ground this week. Japan recovered to levels seen in early August before the Bank of Japan's rate hike announcement. China remains in celebration mode, with the Hang Seng up 3.9%. India and Australia are following softly (+0.2%). European leading indicators are slightly up. In summary, the markets are riding high on a wave of optimism fueled by China's stimulus measures, strong performances from tech giants, and a favorable macroeconomic environment. Investors are embracing risk, and for now, the outlook remains bright.

Economic highlights:

In Europe, French economic confidence, CPI and PPI, German unemployment figures. In the USA, a series of important economic data, including the Core PCE price index, personal income, household consumption and wholesale inventories, as well as the University of Michigan sentiment. The full agenda is here. 

The dollar is worth EUR 0.8966 and GBP 0.7479. The ounce of gold is up to USD 2,681. Oil is down, with North Sea Brent at USD 71.19 a barrel and US light crude WTI at USD 67.79. The yield on 10-year US debt is at 3.76%. Bitcoin is up to USD 64,450.

In corporate news:

  • The US Justice Department opens an investigation into Super Micro Computer, according to the WSJ.
  • ARM Holding was spurned by Intel after seeking to buy one of its divisions, according to Bloomberg. Meanwhile, Intel and the US will finalize an $8.5 billion chip financing deal by the end of the year, according to the FT.
  • Southwest Airlines cuts growth targets and limits hiring to mitigate the impact of Boeing delays.
  • Alphabet invests $3.3 billion in two data centers in South Carolina.
  • Costco loses 1.4% post-trade after its quarterly results.
  • TPG acquires a minority stake in wealth manager Homrich Berg for $1 billion.
  • Walt Disney reportedly cuts U.S. jobs to reduce costs.
  • Dell asks its global sales team to work five days a week in the office, according to a memo.
  • Cisco announced on Friday that it was inaugurating its first facility in India, aiming to generate over $1.3 billion in revenues and create 1,200 jobs in the region.
  • Establishment Labs received approval from the US Food and Drug Administration for its Motiva implants.
  • Intel - According to the Financial Times, Intel and the government are close to finalizing direct financing of $8.5 billion for the chipmaker by the end of the year.

Analyst recommendations:

  • Constellation Energy Corporation: DBS Bank downgrades to hold from buy with a price target raised from USD 215 to USD 250.
  • Dollar General Corporation: Citi downgrades to sell from neutral with a price target reduced from USD 91 to USD 73.
  • Nextera Energy: DBS Bank downgrades to hold from buy with a target price of USD 90.
  • Smartsheet Inc.: Citi downgrades to neutral from buy with a target price reduced from USD 63 to USD 56.50.
  • Snap Inc.: President Capital Management Corp upgrades to buy from neutral with a target price of USD 13.
  • Wynn Resorts, Limited: Morgan Stanley upgrades to overweight from equal weight with a target price raised from USD 97 to USD 104.
  • Affirm Holdings, Inc.: President Capital Management Corp maintains its buy recommendation with a price target raised from 41 to USD 51.
  • Applovin Corporation: Morgan Stanley maintains its market weight recommendation and raises the target price from 80 to USD 110.
  • Fors Tran: Compass Point Research & Trading maintains its buy recommendation and raises the target price from USD 118 to USD 156.
  • Walmart Inc.: Citigroup maintains its buy recommendation with a price target raised from USD 75 to USD 98.
  • Burberry Group Plc: AlphaValue/Baader Europe upgrades to add from buy with a price target raised from GBX 777 to GBX 831.
  • Cranswick Plc: Peel Hunt upgrades to add from hold with a price target raised from GBX 4500 to GBX 5100.
  • Intermediate Cap: BNP Paribas Exane downgrades to neutral from outperform with a price target reduced from GBP 26 to GBP 25.
  • ROLLS-ROYCE Hold: Kepler Cheuvreux downgrades to hold from buy with a target price of GBX 540.
  • Volution Group Plc: Peel Hunt downgrades to hold from buy with a target price raised from GBX 495 to GBX 600.