That's not so bad, is it?

The first week of July 2024 has been quite favorable for stock market indexes, as well as for gold, oil, and bonds (with yields falling, thus prices rising). US central bankers remain pivotal, while corporate earnings reports are starting to come in. Inflation continues to be a significant factor, adding some spice as we approach the end of the week. Let's review the latest market movements before delving into the political turmoil in France.

Equities enjoyed a notable upturn last week, both in the United States and Europe. Major US technology stocks continued their ascent, with the Nasdaq100 gaining 1.02% on Friday, setting a new record close at 20,392 points, and achieving a 3.6% increase over the week. Meanwhile, the Dow Jones struggled to keep pace. The widening gap with the Russell 2000 index of small and medium-sized US companies, which lost ground last week, is particularly striking. We're still seeing a pattern where market leaders are surging ahead, while the rest of the market is striving to catch up. Perhaps the Russell 2000 will get its revenge when the Fed makes its first rate cut. On the Old Continent, the CAC40 gained 2.62%, benefiting from a rebound in banking stocks and utilities. In Frankfurt, the DAX followed suit with a rise of 1.32%, while London's FTSE100 advanced by 0.49%.

On the political front, France experienced a decisive weekend with the second round of legislative elections. However, the outcome remains unclear. The left-wing alliance Nouveau Front Populaire surprised everyone by coming out on top, ahead of the centrist coalition of the Macronist camp and the Rassemblement National. With neither camp achieving an absolute majority, France finds itself at a delicate political crossroads. This fragmented landscape suggests a period of instability, with tough political negotiations ahead to form a pseudo-coalition capable of governing. The crucial question is who is in a position to form a government and who will occupy the post of Prime Minister at Matignon? The markets, for their part, seem to be greeting this uncertainty with surprising resilience, likely reassured that the most radical scenarios have been avoided.

Let's move on to the macroeconomic side of the week, which promises to be particularly busy. Tomorrow, U.S. Federal Reserve Chairman Jerome Powell begins his semi-annual hearings before Congress, an exercise always closely scrutinized by the markets. Investors will be on the lookout for any hints in his speech that might indicate the Federal Reserve's stance for its upcoming meetings. Thursday's session will also be crucial, with the publication of US inflation figures for June. The following day, producer prices and consumer sentiment will provide further insights into the health of the US economy. Finally, let's not forget the numerous speeches by Fed bankers at various events throughout the week, each contributing to shaping market expectations for one or two rate cuts by the end of the year.

On the corporate front, the half-yearly results season is getting underway, with the first heavyweights reporting. This week, semiconductor giant TSMC opens the ball, followed by consumer stalwarts such as Costco Wholesale and Pepsico. But all eyes will be on the banking sector, with JPMorgan, Wells Fargo and Citi set to report results later this week.

Quite a lot has happened since the markets closed last week in the political and economic arenas. Here is a non-exhaustive list:

• Gabriel Attal announces his resignation as Prime Minister.
• China retaliates against EU tariffs by holding a hearing on European cognac imports.
• Hamas accepts proposal for talks to free Israeli hostages.
• Reformist Pezeshkian elected Iranian president
• Major Texas ports close in preparation for Tropical Storm Beryl.

In the Asia-Pacific region, double standards prevail. Japan and South Korea are hovering around equilibrium, while China continues to lose ground, weighed down by renewed trade tensions. The Hang Seng still lost 1.77%. On the Sydney Stock Exchange, the week began 0.70% lower, erasing most of last week's gains. Leading Western indicators are little bit bullish.

Today's economic highlights

There are no major indicators today, but you can read all about them here.

The dollar is down to 0.9226 EUR and 0.7799 GBP  while the ounce of gold is stabilizing at USD 2,375. Oil is also treading water, with North Sea Brent at USD 86.10 a barrel and US light crude WTI at USD 82.15. The yield on 10-year US debt is holding steady at 4.296%. Bitcoin is trading at around 57,125 USD.

In corporate news:

• Boeing has agreed to plead guilty to criminal fraud and pay a fine of $243.6 million to settle a dispute with the US Department of Justice (DOJ) regarding two fatal 737 MAX crashes that occurred in 2018 and 2019, the US government said in a court document on Sunday.
  
• Paramount Global and Skydance announced their merger on Sunday, opening a new chapter for one of Hollywood's oldest studios. The companies have agreed on a two-step process in which Skydance and its partners will acquire National Amusements, which holds the Redstone family's majority stake in Paramount, for $2.4 billion in cash, the two groups specified.
  
• Abbott - A trial against the baby formula manufacturer is set to begin on Monday, with the company's product accused of causing a potentially fatal intestinal disease.
  
• Energy sector - Texas' largest ports suspended operations and maritime traffic on Sunday due to the passage of Hurricane Beryl.

Analyst recommendations:

• Ally Financial: JP Morgan upgrades to neutral from underweight with a target price raised from USD 39 to USD 45.
  
• American Express: JP Morgan maintains its overweight rating and raises the target price from USD 240 to USD 268.
  
• Capital One Financial: JP Morgan maintains its neutral recommendation and raises the target price from 148 to USD 155.
  
• Csx: Bernstein maintains its market perform recommendation and raises the target price from USD 35 to USD 36.
  
• Discover Financial Services: JP Morgan maintains its neutral recommendation and raises the target price from 120 to USD 132.
  
• Essent Group: JP Morgan maintains its neutral recommendation and raises the target price from 61 to USD 62.
  
• Freeport-Mcmoran: Bernstein maintains its outperform rating and reduces the target price from USD 50.50 to USD 50.
  
• Meta Platforms: Wedbush maintains its outperform recommendation and raises the target price from USD 480 to USD 570.
  
• Mondelez International: RBC Capital maintains its outperform rating and reduces the target price from 83 to USD 80.
  
• Morgan Stanley: Jefferies maintains its buy recommendation and raises the target price from USD 109 to USD 114.
  
• Newmont: Bernstein maintains its market perform recommendation with a price target raised from 45 to USD 46.
  
• Norfolk Southern: Bernstein maintains its outperform recommendation and reduces the target price from USD 288 to USD 285.
  
• Onemain Holdings: JP Morgan maintains its overweight recommendation and raises the target price from 52 to USD 54.
  
• Pinterest: Wedbush maintains its neutral recommendation with a price target raised from USD 44 to USD 46.
  
• Range Resources: Jefferies remains at hold with a target price raised from 34 to USD 35.
  
• Raymond James Financial: Jefferies remains at hold with a price target raised from USD 122 to USD 123.
  
• Synchrony Financial: JP Morgan maintains its neutral recommendation and raises the target price from 46 to USD 52.
  
• The Goldman Sachs Group: Jefferies maintains its buy recommendation and raises the target price from USD 478 to USD 523.
  
• The Hershey Company: RBC Capital maintains its sector perform recommendation and reduces the target price from 213 to USD 209.
  
• Union Pacific Corporation: Bernstein maintains its outperform rating and reduces the target price from USD 290 to USD 273.