According to the Labor Department, the U.S. consumer price index rose 7.1% in November on a yearly basis, its lowest annual rate since December 2021. This is lower than the consensus of 7.2%.

Excluding energy and food, core CPI gained 6% last month, in line with expectations. Between October and November, consumer prices gained 0.1%, while core CPI inched up 0.2%.

“We look for the Fed to proceed with its signaled 50 bps hike tomorrow, although the prospect of a further downshift to a 25-bps hike come its first meeting of 2023 has increased with this report,” said analysts at Well Fargo. However, they added that while the pace of inflation is expected to slow further over the next few months, “the roughly 5% pace of wage growth is likely to keep the Fed in inflation-fighting mode for a while yet.“

In any case, this is a welcome reading ahead of the US central bank monetary policy decision tomorrow. Chief Powell has been careful not to communicate much, but investors are widely expecting a 50-basis point rate hike, which would bring Fed Funds from the "3.75 to 4%" zone to the "4.25 to 4.50%" zone.

Powell will also be cooking up the Fed's economic forecasts tomorrow as a side dish to the main course. This document is important for two reasons. First, it contains the Fed's quarterly update of its expectations over a two-year period. Secondly, because it contains a table detailing the estimate of the high point of the key rates of each participant of the monetary policy committee for the current year and the next three. This is valuable information that can be used to refine the forecasts of the evolution of US monetary policy, both in space (where will the rate peak be?) and in time (how long will the higher rate policy last?).

For dessert, we will have to wait until Thursday and the publication of the November US retail sales. The interpretation of the figures will depend on the dishes served earlier and the mood of investors, which is often volatile this year. Bad numbers could support the sentiment that punitive monetary policy is working, but could reinforce fears of a hard economic landing. Good numbers would reawaken fears of continued tight monetary policy intensity and duration, but would reassure the resilience of the U.S. consumer.

The meal will end with monetary policy decisions by the Bank of England and the European Central Bank. Although they are less appetizing in terms of investor interest, these announcements are still important. Beware of indigestion though. 

Yesterday, Wall Street indexes found the resources to rebound from Friday's decline. The Nasdaq 100 recovered 1.24%, the S&P500 about 1.4% and the Dow Jones nearly 1.6%. A small curiosity, however, is that the VIX index, which is a form of measurement of market nervousness, jumped by 9% yesterday. In theory, it is supposed to go down when US equity markets go up, and vice versa. I don't have a good explanation other than that the tension is mounting ahead of this week's important deadlines, while at the same time Wall Street seems to be positioning itself for a rebound.

There are quite a few interesting topics in the political-economic-financial news today. European leaders have agreed to implement a "carbon tax" at the borders, intended to apply the criteria of the European carbon market to imports from the 27. The aim is to push trading partners to adopt high carbon standards. On the other hand, EU members are still unable to agree on a cap on gas prices. Clearly, there are still too many divergent interests. China, on the other hand, has officially referred to the WTO the treatment it is receiving from the US on semiconductors.

After the good CPI figures, all the three main Wall Street indexes are up, with a gain of 2.4% for the S&P 500, 1.5% for the Dow Jones and 3.3% for the Nasdaq 100.

 

Economic highlights of the day

Three highlights today: the second reading of German inflation in November, the ZEW index of German financial confidence and the first estimate of U.S. inflation in November. All the macro agenda is here. 

The dollar is down 0.9% against the euro to EUR 0.9394 and 1.1% against the pound to GBP 0.8055. The ounce of gold is up  to 1819 dollars. Oil rallied, with North Sea Brent at USD 79.72 per barrel and US WTI light crude at USD 74.60. The 10-year US debt yield is back up to 3.60%. Bitcoin is trading around 17,800 dollars.

 

In corporate news:

* United Airlines announced Tuesday that it has placed an order with Boeing for 100 787 Dreamliner and 100 737 MAX aircraft, an order worth about $43 billion at list price.

* Oracle gained 2.7 percent in premarket trading after the company reported better-than-expected revenue Monday night, buoyed by strong demand for its cloud computing business.

* Apple said Tuesday it has invested more than $100 billion in its supply network in Japan over the past five years during a visit to the archipelago by its CEO, Tim Cook.

* IBM announced Tuesday a partnership with the Japanese group Rapidus in the production of advanced chips in the archipelago by the second half of the decade amid tensions between Washington and Beijing.

* Activision Blizzard announced Monday evening that it is discussing possible partnerships in China to continue offering its flagship game "World of Warcraft" in the country after the non-renewal of its licensing agreement with NetEase.

* Uber, Doordash - European parliamentarians agreed Monday on draft stricter rules on employment conditions for digital platform workers ahead of planned detailed negotiations with European Union member states, drawing criticism from advocacy group Delivery Platforms Europe.

* Raytheon Technologies gains 1.2% in after-hours trading after announcing a share buyback plan worth up to $6 billion.

* Mirati Therapeutics jumped 8.6% in after-hours trading after the U.S. Food and Drug Administration (FDA) approved its lung cancer treatment adagrasib.

 

Analyst recommendations:

  • Amphenol: Credit Suisse reinstated coverage with a recommendation of outperform. PT up 16% to $93.
  • Bumble: BofA Global Research initiates a "buy" rating, citing a strong operating balance sheet and sound fundamentals
  • Coherent Corp: Morgan Stanley upgrades to overweight from equal-weight. PT up 27% to $45.
  • Coupa Software: RBC upgrades its recommendation to "in line with sector performance" from "underperform".
  • Domino's Pizza: Panmure Gordon starts tracking as a buy, targeting GBp 375.
  • Dover: Credit Suisse reinstated coverage with a recommendation of outperform. PT up 22% to $171.
  • First Hawaiian: J.P. Morgan upgrades to neutral from underweight. PT up 2.7% to $26.
  • Honeywell International: BofA Securities adjusts price target to $265 from $245, maintains Buy rating.
  • Huntington Bancshares: J.P. Morgan cut the recommendation to underweight from neutral. PT down 0.8% to $14.50.
  • KeyCorp: J.P. Morgan downgrades to underweight from neutral. PT down 3.2% to $17.
  • NetApp: Morgan Stanley downgrades to underweight from equal-weight. PT down 11% to $58.
  • PayPal: Piper Sandler upgraded the stock to "neutral".
  • Philip Morris: Citi downgrades to neutral from withheld. PT up 6.2% to $109.
  • Robinhood: Citigroup lowers its recommendation to "neutral" from "buy".
  • Signature Bank: Morgan Stanley downgrades to equal-weight from overweight. PT up 24% to $152.
  • SVB Financial: Morgan Stanley downgrades to underweight from equal-weight. PT down 17% to $186.
  • Target: Cleveland Research downgrades Target to Neutral Rating from Buy.
  • TE Connectivity: Credit Suisse reinstated coverage with a recommendation of outperform. PT up 16% from last price to $93.
  • Walt Disney: Fubon Securities initiated coverage with a recommendation of neutral. PT set to $103.
  • Wise: Jefferies starts tracking at hold with a GBp 624 target.
  • Wizz Air: Oddo BHF upgrades to outperform from neutral. PT up 21% to 2,900 pence.
  • Pinterest:  Piper Sandler upgrades its recommendation on the social network to "overweight" from "neutral.