Goldman Sachs and Morgan Stanley are due to release their results this morning, after Wells Fargo, Bank of America , Citigroup and JPMorgan Chase posted lower earnings on Friday due to higher costs.

Investors are also awaiting Fed Board Governor Christopher Waller's remarks, expected at 11:00 am ET, for clues on his view on the timing of rate cuts.

All indices were down yesterday in Europe, after central bankers told investors that they should be careful not to get too carried away with rate cuts. Joachim Nagel and Robert Holzmann hammered home this point, the latter even pointing out that, with the Red Sea situation, we shouldn't even count on the tail end of monetary easing starting in 2024. If you're unfamiliar with ECB geopolitics, you should know that Nagel and Holzmann are the two most orthodox central bankers in the pack. The fact that they are German and Austrian respectively, two countries historically attached to austere monetary policies, is of course no coincidence.

In any case, their respective speeches yesterday weighed on stock market indices. To top it all off, they coincided with the announcement of a 0.3% contraction in German GDP in 2023, making the eurozone's largest economy the only country in recession in the G7. The Stoxx Europe 600 index contracted by 0.5% yesterday and is down 0.2% this morning.

Overnight in Asia, indices generally turned red, with the exception of Bombay. In Tokyo, the Topix failed to record a ninth consecutive session of gains. The Japanese market lost 0.9% this morning, which is probably reasonable given the upward slope of early 2024. China continues to fall, particularly in Hong Kong. On the other eastern markets, Taiwan, South Korea and Australia are down by around 1%.

Yesterday was a holiday in the United States, but not a political one. Iowa kicked off the wave of Republican primaries. Unsurprisingly, Donald Trump won by a landslide with 51.1% of the vote, ahead of Ron DeSantis (21.21%) and Nikki Halley (19.05%). The former US president was ahead in 98 of the state's 99 counties. Vivek Ramaswamy, who came fourth, ended his candidacy to rally behind Donald Trump. Iowa may not be the most difficult state for Donald Trump to win, but it illustrates the solidity of his position in the political landscape.

There are still questions about the imminence of Fed rate cuts. By Friday, the optimists had regained the upper hand. Yesterday, however, the continuing tensions in the Red Sea, which are pushing up freight prices and reinforcing the firmness of oil prices, allowed the pessimists to regain control. The US 10-year yield thus returned to 4%, while the likelihood of a first rate cut in March lost some ground, albeit remaining in the majority. Investors remain uncomfortable with this somewhat aggressive bet, which has nevertheless held up for several weeks. If Fed members were more active in deconstructing this scenario, there could be some nasty surprises in the short term. In fact, this is probably the main sword of Damocles at the moment. We'll see what Fed member Christopher Waller, reputedly close to Jerome Powell, has to say today.

In China, today’s gloomy mood is attributable to ongoing tensions in the real estate sector. Financial giant Ping An has added some forty real estate companies to its list of those eligible for financial support. Observers see this as Beijing's way of putting pressure on large companies to help a sector that remains in difficulty. It also illustrates the lack of sustainable solutions from central government. Developer Country Garden has confirmed that 2024 will be another complicated year for the real estate industry. In parallel, Bloomberg revealed this morning that Chinese banks have reduced their ties with Russia as part of the restrictions imposed by the United States. Nothing to do with any of the above, but I didn't know where to put it. To conclude on this subject, tomorrow there will be a salvo of important macroeconomic indicators for China: property prices, GDP and unemployment rates. Perhaps this will give us a clearer picture.

Economic highlights of the day:

German inflation for December, UK jobless claims and unemployment rates, and the US Empire Manufacturing index are on the agenda. 

The dollar is up 0.5% against both the euro and the pound to EUR 0.9188 and GBP 0.7907. The ounce of gold is slightly down to USD 2037. Oil remains firm, with North Sea Brent at USD 79.23 a barrel and US light crude WTI at USD 73.47. The yield on 10-year US debt rises to 4%. Bitcoin is trading at 42,700 USD.

In corporate news:

  • Boeing will carry out additional quality checks on the 737 MAX following the accident in early January in which a fuselage part separated from an Alaska Airlines aircraft, the head of the group's commercial aircraft division said on Monday. The stock lost 2.6% before the opening.
  • Tesla lost 2.1% in pre-market trading after the group's founder, Elon Musk, said on Monday that he had no plans to develop the automaker into a leader in artificial intelligence and robotics without holding at least 25% of the voting rights on the board of directors, almost double his current stake.
  • Apple announced on Monday exceptional discounts on its iPhones in China, a sign of the increased competition faced by the American group in this crucial market. Apple shares were down 1.5% in pre-market trading.
  • Microsoft and Vodafone have signed a 10-year partnership agreement to offer AI-generating, digital, enterprise and cloud services.
  • Synopsis - The software maker has finalized terms for the acquisition of engineering software company Ansys for around $35 billion, two people familiar with the matter said on Tuesday.
  • Blackstone, the world's largest alternative asset manager, will double the headcount of its private equity business in Singapore over the next two years, a senior executive said.

Analyst recommendations:

  • Advanced Micro Devices: Barclays maintains its overweight recommendation and raises the target price from USD 120 to USD 200.
  • Arista Networks: Piper Sandler & Co maintains a neutral recommendation with a price target raised from USD 209 to USD 254.
  • Cloudflare: Piper Sandler & Co maintains a neutral recommendation with a price target raised from USD 60 to USD 76.
  • Cms Energy Corporation: Wolfe Research upgrades to outperform from peerperform with a target price of USD 62.
  • Crest Nicholson Holdings: Jefferies downgrades to hold from buy with a target price reduced from GBX 331 to GBX 234.
  • Direct Line Insurance Group: Berenberg upgrades to buy from hold with a price target raised from GBX 170 to GBX 195.
  • Dollar General Corporation: Morgan Stanley upgrades to overwt from equalwt with a price target raised from USD 130 to USD 160.
  • Drax Group: Citi downgrades to sell from neutral with a price target reduced from GBP 4.74 to GBP 4.37.
  • Dte Energy Company: Wolfe Research downgrades to peerperform from outperform.
  • Fortinet: Wells Fargo downgrades to equalweight from overweight with a price target raised from USD 60 to USD 65.
  • Hewlett Packard Enterprise Company: Bernstein downgrades to market perform from outperform with a price target reduced from USD 20 to USD 17.
  • Idexx Laboratories: Goldman Sachs maintains its buy recommendation and raises the target price from USD 500 to USD 650.
  • Intel Corporation: Barclays maintains its equalweight recommendation and raises the target price from USD 32 to USD 44.
  • Itv: Goldman Sachs downgrades to sell from neutral with a target price reduced from GBX 67 to GBX 60.
  • Lam Research Corporation: Barclays maintains its equalweight recommendation and raises the target price from USD 600 to USD 750.
  • Lloyds Banking Group: Autonomous Research downgrades to underperform from neutral with a price target reduced from GBP 0.55 to GBP 0.50.
  • Moneysupermarket.com Group: Investec downgrades to hold from buy with a price target reduced from GBX 330 to GBX 280. Jefferies downgrades to hold from buy with a target price reduced from GBX 305 to GBX 265.
  • Netapp: Raymond James downgrades to market perform from outperform.
  • Northrop Grumman Corporation: Baird downgrades to neutral from outperform with a target price of USD 505.
  • Nxp Semiconductors: Barclays upgrades to overweight from equalweight with a price target raised from USD 200 to USD 260.
  • Oxford Nanopore Technologies: Peel Hunt downgrades to reduce from sell with a target price of GBX 155.
  • Paypal Holdings: Mizuho Securities downgrades to neutral from buy with a price target reduced from USD 72 to USD 65.
  • Persimmon: Jefferies upgrades to buy from hold with a price target raised from GBX 1181 to GBX 1706.
  • Qualcomm: BNP Paribas Exane maintains its outperform recommendation and raises the target price from USD 130 to USD 160.
  • Rio Tinto: Morningstar upgrades to buy from hold with a price target raised from GBX 5700 to GBX 6100.
  • Rightmove: JP Morgan downgrades to underweight from neutral with a price target reduced from GBP 5.85 to GBP 4.93.
  • Rtx Corporation: Baird downgrades to neutral from outperform with a price target raised from USD 88 to USD 94.
  • Seagate Technology Holdings: Barclays maintains its equalweight recommendation and raises the target price from USD 65 to USD 85.
  • Starbucks Corporation: Morgan Stanley upgrades to overweight from equal weight with a price target raised from USD 112 to USD 120.
  • Target Corporation: Morgan Stanley upgrades to overwt from equalwt with a price target raised from USD 140 to USD 165.
  • Teleflex Incorporated: Piper Sandler & Co maintains a neutral recommendation with a price target raised from USD 225 to USD 280.
  • The Home Depot: Piper Sandler & Co upgrades to overweight from neutral with a price target raised from USD 311 to USD 400.
  • Tractor Supply Company: Morgan Stanley downgrades to underweight from equal weight with a target price of USD 195.
  • Taylor Wimpey: Peel Hunt downgrades to hold from add with a price target raised from GBX 125 to GBX 145.
  • Western Digital Corporation: Barclays upgrades to overweight from equalweight with a price target raised from USD 45 to USD 65. Deutsche Bank upgrades to buy from hold with a price target raised from USD 45 to USD 65.
  • Wise: Numis downgrades to hold from buy with a target price of GBX 950.