Something a little unusual happened yesterday. Powell implicitly acknowledged that the Fed's rate peak had passed (the market knew that the Fed knew this but was pretending otherwise). He also paved the way for rate cuts next year, adopting a stronger "pro-growth" tone than the market had expected. The dot plot summarizing the central bank's own rate forecasts points to 75 basis points of rate cuts in 2024. That's a little less than the market forecast (110 points), but it's enough to demonstrate that central bankers have clearly pivoted. Moreover, the Fed has revised downwards its core inflation expectations for 2023, 2024 and 2025.

The ideal scenario for investors - a Fed that will begin its monetary easing cycle, accelerating it if necessary if the economy falters – is becoming reality. The CME's FedWatch tool predicts an 88% probability of a first rate cut in March, compared with 41% the previous day and 10.5% a month earlier. US bond yields took the elevator down rather than the stairs, with a 10-year maturity at less than 4% for the first time since last July, while the three major indices gained more than 1%, enabling the Dow Jones to pass the 37,000-point mark and set a new all-time record. The S&P500 and Nasdaq will have to wait a little longer, but this is fast approaching. I'd like to add to the trio this morning the US mid-cap index, the Russell 2000, which we talk about regularly because it's usually the main beneficiary of these phases of monetary paradigm change. And indeed, yesterday it jumped 3.5%, a sign of investors' continuing strong appetite for this segment.

Meanwhile, the Bank of England today released its decision. And the tone was much more hawkish, which also took investors by surprise. It kept its rates unchanged, but said British interest rates needed to stay high for 'an extended period'.

There was no discussion of cutting interest rates, and the BoE remains concerned that inflation in Britain will continue to be stickier than in the United States and the euro zone. This is despite yesterday’s data showing a slowdown in wage growth and a 0.3% fall in gross domestic product in October.

Elsewhere in the news, COP28 produced a slightly more ambitious agreement than seemed likely on Monday. It was decided to move away from fossil fuels, which are apparently mentioned in their entirety for the first time in a final text, whereas up until now only coal had been formally condemned. In the United States, Congress has approved the opening of an impeachment inquiry into Joe Biden because of his son's business dealings abroad. However, the project has virtually no chance of success, even if it contributes to further polarizing factions less than a year before the US presidential election.

In China, Country Garden Holdings has apparently managed to meet a payment deadline. Why this one? Why now? I don't know, but the announcement has somewhat reduced the specter of cascading real estate bankruptcies in the country.

We might have expected a green wave in the Asia-Pacific region, but this was not the case. In Japan, the yen rebounded, dragging the Nikkei 225 down 0.7% this morning. Mainland China, still with a kind of momentum of its own, is also down. Hong Kong rallied by 0.8%, led by the real estate and technology sectors. Other markets reacted more rationally to the Fed's announcements: gains exceeded 1% in South Korea, Taiwan and India. Special mention goes to Australia, where the ASX200 ended up 1.65%. European leading indicators are bullish today ahead of the monetary decision of the European Central Bank and comments from Christine Lagarde. Futures on the main Wall Street Indices were up by 0.2% in premarket trading.

Economic highlights of the day:

Central bank decisions from the SNB, the BoE and the ECB are on the agenda, along with US new jobless claims, retail sales and business inventories. The full agenda is here. 

The dollar is down 0.2% against the euro and 0.6% against the pound to EUR 0.9155 and GBP 0.7876. The ounce of gold rebounds to USD 2031. Oil stabilizes, with North Sea Brent at USD 75.91 a barrel and US light crude WTI at USD 71.03. The yield on 10-year US debt falls to 3.98%. Bitcoin is trading at USD 42,200.

In corporate news:

  • Adobe said on Wednesday that regulatory pressure on its subscription models was increasing, and now expects below-consensus annual and quarterly revenues. The stock lost 5.4% before the opening.
  • Apple reached a record closing price of $197.96 per share on Wednesday, buoyed by a broad rally on Wall Street following the Federal Reserve's latest decision.
  • Nordson- The equipment manufacturer beat Wall Street estimates for fourth-quarter earnings on Wednesday, thanks to strong demand for products in its Precision Industrial Solutions segment.
  • Berkshire Hathaway has acquired nearly 10.5 million shares of Occidental Petroleum since the beginning of the week for approximately $588.7 million, according to a document filed Wednesday with the U.S. Securities and Exchange Commission.
  • Moderna rises by around 7% before the opening, after a positive experimental result for its melanoma vaccine.
  • The European Commission said on Thursday that it had asked Apple and Google to clarify their risk management under the new Digital Services Act.
  • Amazon- Europe's highest court on Thursday overturned a court decision ordering the group to pay 250 million euros in back taxes to Luxembourg.
  • Meta Platforms officially launched its Threads application in Europe.
  • Tesla shortened the expected delivery time for its Model 3 and Model Y in China to two to six weeks, compared with six to nine weeks previously, according to its Chinese website on Thursday.
  • Mattel said on Wednesday that it planned to make a feature film based on its "American Girl" doll brand with Paramount Pictures and Temple Hill Entertainment, following the box-office success of its "Barbie" film earlier this year.
  • The World Health Organization on Thursday urged governments to treat e-cigarettes in the same way as tobacco, while cigarette companies such as Philip Morris are banking on these alternatives to smoking.
  • Medtronic said on Wednesday that the US Food and Drug Administration (FDA) had approved its system for a type of condition that can cause stroke or heart failure.

Analyst recommendations:

  • Adobe Inc.: Morningstar downgrades to hold from sell with a price target raised from USD 510 to USD 610. CTBC Securities Investment Service Co LTD drops coverage on the stock.
  • Airbnb, Inc.: CTBC Securities Investment Service Co LTD drops coverage on the stock.
  • Apple Inc.: CTBC Securities Investment Service Co LTD drops coverage on the stock.
  • Costco Wholesale Corporation: CTBC Securities Investment Service Co LTD drops coverage on the stock.
  • Fmc Corporation: BMO Capital Markets downgrades to market perform from outperform with a price target reduced from USD 80 to USD 63.
  • Johnson & Johnson: CTBC Securities Investment Service Co LTD drops coverage on the stock.
  • Live Nation Entertainment, Inc.: Morgan Stanley upgrades to overweight from equalwt with a target price raised from USD 100 to USD 110.
  • Marathon Petroleum Corporation: Wells Fargo upgrades to overweight from equalweight with a price target raised from USD 159 to USD 169.
  • Netflix, Inc.: CTBC Securities Investment Service Co LTD drops coverage on the stock.
  • Nike, Inc.: CTBC Securities Investment Service Co LTD drops coverage on the stock.
  • Northrop Grumman Corporation: Wolfe Research downgrades to underperform from peerperform with a target price of USD 450.
  • Snowflake Inc.: CTBC Securities Investment Service Co LTD drops coverage on the stock.
  • Stanley Black & Decker, Inc.: JP Morgan downgrades to underweight from neutral with a target price of USD 89.
  • Blackrock, Inc.: Keefe Bruyette &Woods maintains its outperform rating and raises the target price from USD 746 to USD 914.
  • Discover Financial Services: Wells Fargo maintains its equalweight recommendation and raises the target price from USD 90 to USD 110.
  • Etsy, Inc.: Wolfe Research maintains its outperform rating and raises the target price from USD 76 to USD 100.
  • Fmc Corporation: BMO Capital Markets downgrades to market perform from outperform with a price target reduced from USD 80 to USD 63.
  • Pfizer, Inc.: Redburn Atlantic maintains a neutral recommendation with a price target reduced from USD 40 to USD 23.
  • Rocket Companies, Inc.: Wells Fargo maintains its overweight recommendation and raises the target price from USD 10 to USD 13.
  • Snap Inc.: Piper Sandler &Co maintains a neutral recommendation with a price target raised from USD 9 to USD 12.
  • Synchrony Financial: Wells Fargo maintains its equalweight recommendation and raises the target price from USD 30 to USD 38.
  • Barratt Developments Plc: Citi downgrades to neutral from buy with a price target raised from GBP 4.86 to GBP 5.71.
  • Next Plc: Stifel downgrades to hold from buy and raises the target price from GBX 8000 to GBX 8400.
  • Rio Tinto Plc: JP Morgan upgrades to overweight from neutral with a price target raised from GBP 63.10 to GBP 70.
  • Severn Trent Plc: JP Morgan downgrades to underweight from neutral with a target price raised from GBP 24 to GBP 24.50.
  • The Berkeley Group Holdings Plc: Peel Hunt downgrades to hold from add with a price target raised from GBX 3900 to GBX 4450.