In the calm before the storm, financial markets are taking a breather on this fine Monday, as they brace for the tech titan Nvidia's earnings report due on Wednesday. Over at Wall Street, the pre-market scene is a mixed bag: Nasdaq and S&P 500 futures are flat, while Dow Jones futures are slipping by 0.2%. Across the pond, European markets are showing a similar lack of enthusiasm, with the main indices in the red. Paris down by 0.4%, Frankfurt dipping 0.5%, and London flat.  Investors are eagerly awaiting a few key indicators, but let's not kid ourselves; all eyes are on Nvidia. The semiconductor giant recently dethroned Apple to become the world's largest company by market capitalization, boasting a staggering $3.483 trillion. 

Last week, the anticipated post-election rally in stock indices hit a few bumps. Investors are eager to take risks, yet they're uneasy about certain factors, particularly the direction of US interest rates amidst a backdrop of tax cuts and increased tariffs. The initial week of the "Trump 2" era was promising, with Wall Street climbing 4.66%. However, the second week saw a 2.08% drop. While this still represents a net gain, it fell short of the sky-high expectations set by the Musk enthusiasts.

Across the pond, Europe aimed to halt the stock market's decline and keep its leaders from making errant remarks. Both goals flopped. The Stoxx Europe 600 index marked its fifth consecutive losing week, down 0.7%. Meanwhile, Olaf Scholz's solo phone call to Vladimir Putin, reminiscent of Emmanuel Macron's bold moves, didn't sit well with allies or Volodymyr Zelensky. Over the weekend, Russia launched a significant attack on Ukraine's energy infrastructure. In response, the White House granted Ukraine permission to strike Russian territory with US-made long-range missiles on a selective basis.

Despite the recent market turbulence, Wall Street remains the investor's darling. The consensus is that Trump's return will boost the US economy, albeit at the expense of the global market. Investor exposure to US equities is at its highest since 2013. As Bank of America's Chief Strategy Officer, Michael Hartnett, quipped, the strategy is 'sell hubris, buy humiliation,' referring to the Democrats' downfall. Yet, Wall Street's cautious tone last week signals investor doubts. The valuation gap between US and global equities is at a 75-year peak. Meanwhile, the dollar is at a 55-year high.

The real concern is Trump's potential inflationary policies, which could disrupt the beloved rate-cutting narrative. The US Federal Reserve, having just initiated rate cuts, seems uneasy. While two-thirds of the market anticipates a rate cut next month, predictions beyond January 2025 are shaky. Xi Jinping is open to working with Trump, provided four "red lines" are respected: no challenge to the Communist Party's power, no push for democracy, no hindrance to economic growth, and no support for Taiwanese independence. Meeting these conditions seems unlikely.

There are some worrying news, since, according to Bloomberg, North Korea might send Putin 100,000 troops for the war. On the economic front, all eyes will be on Friday's PMI indicators from major economies. Thursday will also bring key US employment, real estate, and Philly Fed index data. In the corporate world, Nvidia will take center stage on Wednesday with its quarterly results. Walmart, Target, Sonova, and Imperial Brands will also be in the spotlight.

In the Asia-Pacific region, markets started the week with mixed results. South Korea led with a gain of over 2%, while Australia and Hong Kong saw modest increases. Conversely, India, Japan, Taiwan, and mainland China experienced declines. 

Today's economic highlights:

The NAHB house price index is today's main indicator.

The dollar is down to EUR 0.9465 and GBP 0.7922. The ounce of gold is worth USD 2,603. Oil remains low, with North Sea Brent at USD 71.49 a barrel and US light crude WTI at USD 67.46. The yield on 10-year US debt stands at 4.47%. Bitcoin is just above USD 90,000.

In corporate news:

  • Nvidia's Q4 earnings report indicates a rise in revenue and net income, yet concerns over Blackwell AI chip overheating and release delays have negatively impacted its stock and contributed to mixed sentiments in the US equity market.
  • Alibaba Group Holding has been upgraded to an A+ rating by Fitch and S&P Global Ratings, plans to raise $5 billion through a multi-tranche bond offering in USD and RMB for general corporate purposes, following a 58% YoY increase in net income for the quarter ended Sept. 30.
  • Tesla, Inc. Tesla shares surged nearly 7% in pre-market trading following reports of upcoming federal regulations for autonomous vehicles by President-elect Trump's team, amidst a broader slowdown in the US stock market due to inflation concerns and policy uncertainties, and declines in shares of Leidos, Booz Allen, and Science Applications due to Trump's proposed efficiency measures.
  • Apple Inc. Foxconn has eliminated marital status and age requirements from its job advertisements for iPhone assembly workers in India, while Pegatron, another Apple partner, has agreed to sell a majority stake in its sole iPhone plant in India to Tata Electronics.
  • Brady Corporation reported a rise in fiscal Q1 adjusted earnings to $1.12 per share and net sales of $377.1M, surpassing Street estimates.
  • Twist Bioscience reported a narrower Q4 loss than expected, accompanied by higher revenue, leading to a 13% surge in its shares.
  • Spirit Airlines has filed for Chapter 11 bankruptcy restructuring, securing $350 million in equity investments and $300 million in financing due to debt issues and competitive pressures.
  • Ford Motor Company The US National Highway Traffic Safety Administration (NHTSA) is investigating Ford Motor over complaints that the seat belt retractor pretensioners in approximately 112,567 Ford Expedition SUVs from model years 2019-2020 may deploy inadvertently.
  • Eli Lilly's tirzepatide trial results indicate a significant reduction in heart failure risk, while their obesity drugs, along with Novo Nordisk's, receive substantial coverage from Medicaid, according to analysts.
  • CVS Health has appointed four new board members after negotiations with Glenview Capital.

Analyst recommendations:

  • Biogen Inc.: Needham downgrades to hold from buy.
  • Bright Horizons Family Solutions Inc.: BMO Capital Markets upgrades to outperform from market perform and reduces the target price from USD 137 to USD 125.
  • Cencora, Inc.: Baptista Research downgrades to hold from outperform with a price target raised from USD 261.70 to USD 267.30.
  • Charles River Laboratories International, Inc.: CLSA downgrades to underperform from hold with a target price reduced from USD 205 to USD 164.
  • CVS Health Corporation: Wells Fargo upgrades to overweight from equal weight with a target price raised from USD 60 to USD 66.
  • EOG Resources, Inc.: Piper Sandler & Co downgrades to neutral from overweight with a price target raised from USD 147 to USD 149.
  • Hewlett Packard Enterprise Company: Raymond James upgrades to strong buy from outperform with a target price raised from USD 23 to USD 29.
  • Moderna, Inc.: HSBC upgrades to buy from hold with a target price reduced from USD 82 to USD 58.
  • Performance Food Group Company: Baptista Research upgrades to outperform from hold with a price target raised from USD 87.10 to USD 99.
  • Anglo American Plc: SBG Securities (Pty) Ltd upgrades to buy from hold with a target price of GBP 27.
  • Burberry Group Plc: AlphaValue/Baader Europe downgrades to sell from reduce with a target price raised from GBX 761 to GBX 768.
  • Hays Plc: HSBC upgrades to buy from hold with a target price reduced from GBP 1.04 to GBP 1.
  • Shell Plc: Landesbank Baden-Wuerttemberg upgrades to buy from hold with a target price raised from GBX 2800 to GBX 2900.
  • Sthree Plc: HSBC upgrades to buy from hold with a target price reduced from GBP 4.29 to GBP 4.20.
  • Brookfield Asset Management Ltd.: Jefferies remains at hold with a price target raised from USD 43 to USD 52.
  • Canadian Imperial Bank Of Commerce: BMO Capital Markets maintains its outperform rating and raises the target price from CAD 81 to CAD 99.