And the good news is that inflation in July was in line with what economists expected. The Consumer Price Index rose 0.2% last month on a seasonally adjusted basis, the same increase as in June, the U.S. Bureau of Labor Statistics reported.

Over the last 12 months, the index increased 3.2 percent before seasonal adjustment. Core CPI, which excludes food and energy, gained 0.2 percent in July on a monthly basis, as it did in June. It rose 4.7 percent over the last 12 months. This is all in line with expectations. The main items that kept inflation in check were airline fares, used cars and trucks, medical care and communication.

The figures are even better if we account for an unfavorable basis for comparison. Let me explain. Annual US inflation reached 3% in June. The 3.2% in July marks an upward inflection after several months of decline. On the other hand, the increase between June and July was limited to 0.2%, both in gross terms and in terms of core inflation. Why has annual inflation moved from 3 to 3.2%? Because June 2022 marked the peak of the current inflationary cycle. At that time, prices were 9.1% higher than in June 2021. From then on, the annual variation began to fall: 8.5% in July 2022, 8.3% in August 2022, and so on. July 2023 therefore compares with a time when price rises began to decline quite sharply. So the basis for comparison has become more difficult. In other words, the coming months are likely to see annual inflation in the USA remain at current levels for the long term, or even accelerate from time to time. For example, inflation fell from 8.2% to 7.1% between September and November 2022, again providing a difficult basis for comparison. What should we learn from this? That temporary jolts in consumer prices should not cause the Fed, or investors for that matter, too much concern. The most unfavorable configuration would be a greater and more lasting reacceleration than expected.

The dollar fell after the report, while two-year Treasury yields fell, as investors took this data as a sign that the Fed might not raise rates at its next meeting in September. Futures on all three Wall Street indexes remained firmly in the green.

They look set to recoup some of yesterday’s losses, due to fears about the stability of the financial sector after Moody’s downgraded the rating of several banks. A study highlighting the fact that Americans have never made so much use of the credit function on their payment cards added to the gloom.

There's plenty of news on Thursday, traditionally the busiest day of the week on stock markets. On the political and economic front, the United States has imposed restrictions on investment by American companies in China. The ban concerns sensitive activities such as semiconductors, artificial intelligence and quantum computing. Commentators are divided: some point out that they were expecting a broader range of activities. At almost the same time, the Financial Times explains that Alibaba, Tencent, Baidu and others have ordered $5 billion worth of chips from Nvidia to fuel their AI ambitions.

On the corporate front, there are plenty of earnings releases. Walt Disney put on a show last night, with mixed results offset by the announcement of vast price hikes on its streaming offers, which seems to have reversed the market's sentiment towards the figures: the stock gained just over 2% in after-hours trading. Clearly, investors also appreciated the company's promises to cut costs and the impact (positive at this stage) of the strike in Hollywood: the giant spent less on content financing, due to a lack of production.

Economic highlights of the day:

Macro news revolves around US July inflation and weekly jobless claims. The full agenda is here. 

The dollar is down 0.6% against the euro and the pound to USD 0.9049 and GBP 0.7809. The ounce of gold is worth USD 1928. Oil resumes its ascent, with North Sea Brent at USD 87.35 a barrel and US light crude WTI at USD 83.77. The yield on 10-year US debt reached 4.02%. Bitcoin is trading at around USD 29,560.

In corporate news:

  • Walt Disney shares advanced by 1.9% before the opening, as the company posted third-quarter sales of $22.33 billion, below consensus of $22.5 billion. However, the group said it was focusing on cost reductions.
  • Alibaba was up 3.8% before the opening. The group reported a first-quarter operating margin of 18%.
  • Manulife Financial advanced 3.5% after the close, as Canada's largest insurer reported better-than-expected quarterly earnings, fueled by strong insurance sales in Asia.
  • Tapestry is close to finalizing a deal to buy Capri Holdings, the Wall Street Journal reported on Wednesday, as the American fashion house looks to expand its portfolio to compete with its European rivals. Capri had a market capitalization of $4 billion at Wednesday's close, according to Refintiv data. Capri jumped by around 24.7% before the open on Thursday, while Tapestry gained 0.9%.
  • KKR - An agreement between the fund and the Italian Treasury for a bid for Telecom Italia's landline network could be reached soon, according to sources close to the matter.
  • Lyft gains 1.1% before the opening, the group having announced its intention to further develop its advertising activities.

Analyst recommendations:

  • ABRDN PLC: Barclays maintains its Underweight recommendation with a price target raised from 1.85 to 1.90 GBP.
  • Burberry Group: Bernstein maintains its "Market Perform" recommendation with a price target raised from 2267 to 2333 GBP.
  • Coca-Cola Hellenic: Goldman Sachs maintains its "Buy" recommendation, with the target price raised from 2,700 to 2,800 GBP.
  • Darling Ingredients: Wolfe Research maintains its Outperform recommendation with price target raised from USD 100 to USD 101.
  • Walt Disney: Fubon Securities cut the recommendation to neutral from buy. PT up 12% to $98.
  • Essex Property: Wells Fargo Securities upgrades to equal-weight from underweight. PT up 2.4% to $247.
  • First Horizon Co: Zacks maintains its Neutral recommendation with a price target raised from USD 10 to USD 14.50.
  • Global Payments: Jefferies raised its recommendation to buy from hold. PT u^p 17% to $145.
  • London Stock Exchange: Citi maintains its buy recommendation with price target unchanged at GBP 100.
  • Meta Platforms: GuoSen Securities Co Ltd initiated coverage with a recommendation of buy. PT set to $390.
  • Newmont Corp: National Bank Financial maintains its recommendation at Outperform with a price target reduced from 93 to 92 CAD.
  • OneSpan:  D.A. Davidson & Co cut its recommendation on OneSpan Inc. to neutral from buy. PT down 10% to $12.
  • Qiagen: Morningstar maintains its Buy recommendation with a price target reduced from USD 52 to USD 48.
  • Raymond James: Zacks upgrades from Underperform to Neutral with price target raised from 88 to 114 USD.
  • Rolls-Royce: Barclays maintains a weighted recommendation with a price target raised from GBP 1.56 to 2.39.
  • Sage Group: Goldman Sachs maintains its neutral recommendation with a price target raised from 970 to 980 GBP.
  • Sysco Corp: Morningstar maintains its Hold recommendation with a price target reduced from 78 to 76 USD.
  • Transdigm Group: Jefferies maintains its Buy recommendation with a price target raised from 1000 to 1040 USD.
  • Twilio: Baird maintains its neutral recommendation with a price target raised from USD 56 to USD 62.
  • United Rentals: Zacks maintains its Outperform recommendation with a price target raised from USD 518 to 553.
  • Vulcan Materials: Atlantic Equities maintains its Neutral recommendation with a price target raised from 185 to 225 USD.