July producer prices rose by 2.2% on an annual basis, just a little under the 2.3% expected in the Bloomberg consensus. On a monthly basis, prices rose 0.1% while 0.2% was expected. This shows once again that inflation is on the right track and that Fed rate cuts should be on the menu next month. Futures on Wall Street rose a little after the release and stayed well in the green in premarket trading.

Yesterday, Western stock markets took a breather, waiting for the next round of US economic data. Volatility is calming down, although Middle Eastern geopolitics is giving the oil market a headache. Meanwhile, in China, authorities are trying to tame the bond market with some rather unconventional tactics.

After last week's rollercoaster, yesterday's trading session was like a lukewarm cup of coffee—nothing too exciting. The S&P 500 ended flat, the Dow Jones dipped by 0.4%, and the Nasdaq 100 managed a modest 0.2% gain, thanks to Nvidia's impressive leap. Investors seemed to be hedging their bets, with both gains and losses scattered across sectors. In Europe, the indices were all over the place. London, Zurich, Milan, and Frankfurt saw small gains, while Paris, Brussels, and Copenhagen experienced slight declines. The French CAC 40 is having a rough year, down 3.9% in 2024, making it the worst-performing major index. 

With not much happening in the West, attention shifted to China's central bank, which is trying to make the local bond market behave. Spoiler alert: it's not going well. Demand for bonds is outstripping supply, driving up prices and lowering yields. The authorities are worried this will weaken financial institutions, so they've rolled out some almost laughable measures. Rural banks have been told not to deliver bonds purchased by customers, and domestic banks must now track investors who buy Chinese government bonds. Investing in China is starting to feel like co-investing with the Communist Party, which, unsurprisingly, makes international investors skittish. Equity trading in China has hit its lowest level in over four years, according to Bloomberg. While this hasn't affected other markets yet, it's another potential source of chaos to keep an eye on. In the short term, geopolitics is the big worry. The US and Israel are on high alert for a possible Iranian attack on Israel this week. Oil prices reacted by climbing, with Brent crude back above $81 a barrel after dipping to $79 recently.

Over in the Asia-Pacific region, Tokyo bounced back from its early-month slump with a 3.4% jump this morning, following a public holiday. It feels a bit too good to be true, but hey, who am I to argue with the market? China is relatively stable, while South Korea and India are losing a bit of ground. Australia is picking up a few points. Leading indices are bearish in Europe.

Today's economic highlights:

Indicators today include the ZEW survey of German financial confidence and US producer prices. For those who love a good agenda, you can find the full list here.

The dollar is worth EUR 0.9148 and GBP 0.7818. The ounce of gold is down to USD 2,465. Oil regained some ground, with North Sea Brent at USD 81.72 a barrel and US light crude WTI at USD 79.53. The yield on 10-year US debt inches up to 3.95%. Bitcoin is trading at USD 58,800.

In corporate news:

  • On Holding reported above-consensus sales on Tuesday, supported by strong demand for its shoes and clothing. The stock nevertheless lost 9% before the opening, the company having maintained its annual forecasts.
  • General Motors will recall 21,469 electric SUVs in the U.S. due to unexpected activation of the anti-lock braking system, and will remedy the problem through an automatic update, the U.S. highway safety regulator said on Tuesday.
  • Terawulf - The cryptoasset group gained 3.3% in premarket trading after reporting a reduction in its third-quarter net loss per share, while sales exceeded analysts' expectations and jumped 131.9% year-on-year.
  • Tencent Music Entertainment - The group's New York-listed shares gave up 5% before the opening as the music streaming group reported lower second-quarter sales.

Analyst recommendations:

  • Cytokinetics, Incorporated: Goldman Sachs downgrades to neutral from buy with a price target reduced from USD 85 to USD 60.
  • Dell Technologies Inc.: Barclays upgrades to equalweight from underweight with a target price of USD 97.
  • First Industrial Realty Trust, Inc.: Wolfe Research upgrades to outperform from peerperform with a target price of USD 64.
  • Littelfuse, Inc.: Stifel upgrades to buy from hold with a price target raised from USD 270 to USD 280.
  • Palo Alto Networks, Inc.: Mizuho Securities upgrades to outperform from buy with a price target raised from USD 350 to USD 380.
  • Sarepta Therapeutics, Inc.: Citi drops coverage on the stock.
  • Snowflake Inc.: Mizuho Securities downgrades to outperform from buy with a price target reduced from USD 180 to USD 165.
  • Warner Bros. Discovery, Inc.: Bernstein downgrades to market perform from outperform with a price target reduced from USD 10 to USD 8.
  • Zoominfo Technologies Inc.: Daiwa Securities downgrades to neutral from outperform with a price target reduced from USD 15 to USD 9.
  • Natera, Inc.: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 120 to USD 150.
  • Stellantis N.v.: RBC Capital maintains its outperform rating and reduces the target price from 24 to EUR 18.
  • Bridgepoint Group Plc: JP Morgan upgrades to overweight from neutral with a target price raised from GBP 2.59 to GBP 3.58.