Last week’s PMIs in the US and Europe were mostly better-than expected in services, which highlights the resilience of the economy and strengthens the case for more interest rate hikes.

Equity markets need some new catalysts to keep their good momentum going. The S&P500 stagnated last week (-0.1% over the five sessions), but its 2023 performance is absolutely identical to that of the Stoxx Europe 600: +7.7%. However, the US indices have been moving almost horizontally for three weeks.

Overall, markets remain quite bullish despite recession worries, inflation, questions about the health of banks and fears of a contraction in earnings. This is quite a paradox. I read a piece in the Wall Street Journal explaining that Americans bought nearly $80 billion of stocks and ETFs in the first quarter, close to the record levels set in early 2021 and 2022. This is five times the pace of the pre-pandemic period. Although it appears that the ETFs chosen are more diversified and that the safer money market ETFs are still popular, the appetite for equities is not abating. Meanwhile, the latest statistics from the CFTC, the umbrella organization for derivatives in the US, show that net short positions on the S&P500 are at their highest since 2011. These positions are not necessarily a precursor of a stock market cataclysm because they also include good hedging strategies. But they do show that some of the market is not very comfortable with the current strength in equities. This can partly explain the lateralization of Wall Street indices over the last few sessions.

The corporate results agenda is very full this week. It will even turn into an overdose. I counted 51 earnings reports from companies with a market capitalization of more than $100 billion, and several hundred if you count all the major world stock markets. As is often the case, the focus will be on the big US technology companies (Microsoft and Alphabet tomorrow, Meta Platforms on Wednesday) and on sector barometers such as Coca-Cola and Nestlé for consumer goods, Roche, Merck, Sanofi and AbbVie for healthcare, Danaher, Raytheon and Boeing for industry, TotalEnergies for oil, etc., etc. At the end of the week, investors should have a good idea of the overall content of the companies' results and prospects.

 

Economic highlights of the day:

The Ifo business confidence index in Germany and the Chicago Fed activity index in the US are the main indicators today. All the agenda is here.

The dollar is down 0.2% against the euro to EUR 0.9071 and is flat against the pound at 0.8032. The ounce of gold is worth USD 1984. Oil stabilizes, with North Sea Brent at USD 80.59 a barrel and US WTI light crude at USD 77.02. The US 10-year debt yield is up 3 points to 3.56%. Bitcoin is trading at USD 27,500.

 

In corporate news:

  • Coca-Cola reported better-than-expected quarterly sales on Monday as demand for its soft drinks remained strong despite multiple price hikes. The stock was up 1% in premarket trading.
  • Tesla has begun production of a version of the Model Y for the Canadian market at its Shanghai plant, according to a source close to the matter and an internal note from the group. This is the first time the manufacturer has shipped its vehicles to North America from China.
  • Comcast - Jeff Shell, the chief executive of NBCUniversal, a subsidiary of Comcast, will leave the group after admitting to an inappropriate relationship with a female employee following a complaint that triggered an investigation.
  • Paramount Global has agreed to pay $167.5 million to settle a dispute related to the 2019 merger of Viacom and CBS, a notice shows.
  • Alphabet - Group chief executive Sundar Pichai received a total compensation package of about $226 million in 2022, more than 800 times the median employee salary, a stock advisory shows.
  • Bed Bath & beyond, a US retailer specializing in home furnishings, announced on Sunday that it had filed for bankruptcy protection in the US because it could not raise enough money to stay afloat. The company's shares plunged 38 percent in premarket trading to $0.18.
  • Bankers at JPMorgan Chase have remained in contact with Jeffrey Epstein, a fund manager convicted of sex trafficking of minors who committed suicide in custody in 2019, even after his accounts were closed in 2013, the Wall Street Journal reported Friday, citing sources close to the case.
  • CME Group, the world's largest derivatives exchange, has no plans to launch a nickel exchange to rival the London Metal Exchange (LME), Chief Executive Terry Duffy said on Monday, according to the Financial Times.

 

Analyst recommendations:

  • Glencore: J.P. Morgan remains Overweight with a price target reduced from GBp 6200 to GBp 6100.
  • Halfords: Liberum upgrades to hold from sell. PT up 1.4% to 210 pence.
  • Heritage Financial: Keefe, Bruyette & Woods downgrades to market perform from outperform. PT up 17% to $23.
  • Hill & Smith: Jefferies remains Buy with a price target raised from £1510 to £1610.
  • Intuit: Atlantic Equities initiated coverage with a recommendation of overweight. PT up 19% to $530.
  • Live Nation: Seaport Global Securities initiated coverage with a recommendation of buy. PT up 27% to $85.
  • Melrose Industries: Citigroup resumes its Buy rating, targeting GBp 480.
  • Perion: Stifel downgrades to hold from buy. PT down 6.2% to $36.
  • PPG Industries: J.P. Morgan upgrades to overweight from neutral. PT up 9.9% to $156.
  • Regions Financial: Truist Securities downgrades to hold from buy. PT up 8.9% to $20.
  • Wells Fargo: Baptista Research initiated coverage with a recommendation of hold. PT set to $44.20.
  • Wizz Air: Citigroup upgrades from sell to neutral with a target of GBp 3000.