This was the first drop in five sessions for the US S&P500. In Europe, it was the first fall in nine sessions for the French CAC40. We remain in a positive configuration, still buoyed by the resilient US economy, the prospect of key rates being cut in late spring or early autumn, the frenzied buying of investors and IA-related stocks.

I recently glanced at the front page of Bloomberg's website. There was a big report on the fact that, contrary to what common sense would suggest with high rates, the private equity sector wasn't really having trouble finding financing. But this morning, Bloomberg headlines "Debt-laden companies seek equity as interest costs soar". So, who's right? Bloomberg or Bloomberg? To add to confusion, a third Bloomberg article explains that the U.S. corporate bond market is headed for a record-breaking capital-raising month in February, as issuers "struggle to meet growing investor demand amid falling borrowing costs". So, to sum up, borrowing costs are rising but falling, access to the capital market is wide open but closing, and money is flowing but the tap is closed. In reality, we're back to the age-old principle of "only lending to the rich": quality companies have no real problem raising finance, and easily attract investors. The others have much more difficulty. And those that were in the grey zone, i.e. eagerly awaiting rate cuts to regain a safety cushion, are feeling the pinch now that the timetable has shifted.

The things that could derail markets are still to be found on the debt side (private and public) due to persistently high interest rates. So, investors will be closely following the many statistics to be published this week, in particular PCE inflation, which will be released on Thursday. Reports on gross domestic product (GDP), jobless claims and manufacturing activity should also offer more clues on the timing of rate cuts. The tense geopolitical situation is another destabilizing factor to take into account, especially the Russian-Ukrainian conflict. French president Emmanuel macron just declared that the West hasn’t ruled out sending soldiers in Ukraine, which is a rather worrying statement to make.

In Japan, bond yields rose after higher-than-expected inflation data reinforced the likelihood of a rate hike in the months ahead. In China, the government is said to have injected the equivalent of $57 billion into mainland equities in two months, according to UBS calculations based on inflows into the largest local ETFs. These efforts, combined with a raft of measures to support the real estate and financial sectors, could bring China's equity markets back towards equilibrium by 2024. The broad MSCI China index lost 10.6% in January, but gained 9% in February. The balance sheet is not yet neutral. By contrast, all is well for bitcoin, which hit the USD 57,000 mark for the first time since the end of 2021. The cryptocurrency is up 29% in 2024, making it the most prolific asset class of the year, at least for those who consider bitcoin an asset class.

In Asia Pacific this morning, the wait-and-see attitude dominates. Tokyo, Sydney and Mumbai are treading water. South Korea suffers more, with a KOSPI at -0.8%. China rises in Shanghai (+0.9%) and in Hong Kong (+ 0.9%) during the session. European leading indicators are slightly bearish, with the Euro Stoxx 600 down 0.1%. Futures on Wall Street are mixed in premarket trading, with a 0.2% gain for the Nasdaq 100 and a 0.1% rise for the S&P 500.

Today's economic highlights:

In the United States, durable goods orders, the FHFA house price index, the Conference Board confidence index and the Richmond manufacturing index are on the agenda. 

The dollar is stable at EUR 0.9220 and GBP 0.7892. The ounce of gold holds steady at USD 2,035. Oil rebounds, with North Sea Brent at USD 81.38 a barrel and US light crude WTI at USD 77.23. The yield on 10-year US debt rises to 4.27%. Bitcoin is trading at USD 57,100.

In corporate news:

  • Kroger, Albertsons - The FTC, the US Federal Trade Commission, and eight US states announced on Monday evening that they were taking legal action to block the proposed $24.6 billion takeover of Albertsons by supermarket chain Kroger, believing that the deal would lead to higher food prices.
  • Microsoft - On Tuesday, the European Commission announced its intention to launch a detailed examination of the partnership between the American technology giant and the French artificial intelligence start-up Mistral AI.
  • Zoom Video Communications jumps 10.8% in pre-market trading after the group announces a share buyback plan and higher-than-expected fourth-quarter sales.
  • Expedia - The online travel platform announced on Monday evening its intention to cut around 1,500 jobs worldwide, or 9% of its workforce, as part of its "organizational and technological transformation".
  • Broadcom - The chipmaker suspended the process of selling its Carbon Black security software business, Bloomberg reported Monday evening, citing sources close to the matter.
  • Lowe on Tuesday forecast full-year sales below Wall Street estimates, as consumer spending on major home improvements remains limited.
  • Macy’s on Tuesday forecast below-consensus sales for the year, due to weak demand for its clothing and footwear, and said it would close 150 stores through 2026 as part of its new turnaround plan.
  • JetBlue Airways and Spirit Airlines asked a U.S. appeals court on Monday to overturn a judge's ruling blocking their $3.8 billion merger at the request of the U.S. Department of Justice.
  • Meta Platforms - Group CEO Mark Zuckerberg met with Japanese Prime Minister Fumio Kishida in Tokyo on Tuesday to discuss artificial intelligence, as part of a tour of Asia.
  • Intuitive Machines plummets 20.1% in pre-market trading after announcing an interruption in communications with the Odysseus space module, which landed on the Moon before overturning. The lunar mission, initially scheduled for 7 to 10 days, will be reduced to 5 days.
  • Bristol-Myers Squibb wants to expand its research and development (R&D) presence in India and expects its newly inaugurated site in Hyderabad to become its largest division outside the US by 2025, managing director Christopher Boerner said on Tuesday.
  • Walt Disney - David Greenbaum has been appointed to the newly created position of President of Walt Disney Studios, overseeing Disney LiveAction and 20th Century Studios. He will report to Disney Entertainment co-president Alan Bergman.
  • Dollar Tree - Family Dollar Stores, a subsidiary of the discount retailer, admitted Monday to storing food, medicines and cosmetics in unsanitary conditions in a rodent-infested Arkansas warehouse and agreed to pay $41.67 million, the U.S. Department of Justice announced.

Analyst recommendations:

  • Domino's Pizza Inc.: Morningstar downgrades to sell from hold with a target price of USD 400.
  • Ppg Industries, Inc.: Barclays downgrades to equalweight from overweight with a price target reduced from USD 163 to USD 149.
  • Unity Software Inc.: Piper Sandler & Co downgrades to neutral from underweight with a price target reduced from USD 35 to USD 30.
  • Workday Inc.: Morningstar downgrades to hold from sell with a price target raised from USD 245 to USD 285.
  • Eli Lilly And Company: Berenberg maintains its buy recommendation and raises the target price from USD 680 to USD 850.
  • Okta, Inc.: Wells Fargo maintains its equalweight recommendation and raises the target price from USD 70 to USD 90.
  • Rivian Automotive, Inc.: Morgan Stanley maintains its overweight rating and reduces the target price from USD 24 to USD 14.
  • Walmart Inc.: Barclays maintains its overweight recommendation and reduces the target price from USD 180 to USD 60. Jefferies maintains its buy recommendation and reduces the target price from USD 210 to USD 70. BMO Capital Markets maintains its outperform rating and reduces the target price from USD 195 to USD 65.
  • Bunzl Plc: Peel Hunt downgrades to hold from add with a price target raised from GBX 3200 to GBX 3300.
  • Unilever Plc: Morgan Stanley downgrades to underweight from equal weight with a price target reduced from USD 52 to USD 48. Morgan Stanley downgrades to underweight from equal weight with a price target reduced from GBX 4100 to GBX 3775.
  • Wpp Plc: HSBC downgrades to hold from buy with a price target reduced from GBP 10 to GBP 7.90.