AI has propelled Wall Street upwards this year. Nvidia, Apple, Microsoft, Meta and Broadcom accounted for two-thirds of the index's 18% rise this year, compared with just over 5% for the other 495 stocks. This is still powerful underlying support, even if the spectacular uptrend is over, for the time being at least.

Investors are coming to terms with the fact that additional rate hikes are looming. Why? Essentially because the economy is holding up well, despite months and months of monetary tightening. For the record, the Fed Funds rate was 0.08% in February 2022. It is 5.08% at the time of writing. To explain why this time it's (perhaps) different, I can't recommend enough Robert Armstrong's excellent piece in yesterday's Financial Times Unhedged. The fact that the Fed has not broken any major balance with its monetary policy suggests to investors that the situation could last, reinforcing the hypothesis of a soft economic landing.

Which brings me to the third promise, that of China's economic recovery, which is apparently the source of a new mini-wave of optimism this morning. The reason is that two Chinese regulatory agencies have asked banks to help the country's real estate companies get back on their feet by offering them favorable lending terms.

Investors are cheering any announcement that might reconcile reality - a post-covid economy that is faltering - with their fantasy - a burst of activity that would single-handedly drive global growth. This would involve state-financed stimulus measures, in keeping with the old paradox that investors don't want the public authorities to meddle in their affairs, except sometimes. Today's little announcement propelled the Hang Seng (Hong Kong) up 1.7% overnight, while the CSI 300 (Shanghai and Shenzhen) gained 0.6%. It doesn't take much to be happy. In Japan, the Nikkei is stable. The Japanese index has been less buoyant in recent sessions, no doubt recovering from its first-half bull run. Australia, Taiwan and South Korea gained over 1%, buoyed either by Chinese news or by the solid figures put forward by Taiwan Semiconductor, the semiconductor giant.

In other news, Turkey finally gave the green light to Sweden's entry into NATO, while the organization's summit is currently being held in Lithuania. Several US central bankers spoke yesterday, but their message did not change one bit: further rate hikes will be necessary in the months ahead. The market is still awaiting the release of June's US inflation figures on Wednesday to fine-tune its forecasts. The overheating of prices is expected to show further signs of abating, so we should see a return to the debate between one or two additional rate hikes. But there will be time for that tomorrow. A few corporate earnings releases are starting to come in ahead of earnings season’s official start, which should coincide with PepsiCo's figures on Thursday.

US equity futures were slightly higher Tuesday this morning. The focus is on the official consumer inflation report due for release on Wednesday.

The Dow Jones Industrial Average futures inched up 0.3%, S&P 500 futures was up 0.2%, and so was Nasdaq futures.

Economic highlights of the day:

The dollar is up 0.1% against the euro to EUR 0.9104 and down 0.3% against the pence Sterling to GBp 77.5074. The ounce of gold is up to USD 1933. Oil has rallied, with North Sea Brent at USD 77.97 a barrel and US light crude WTI at USD 73.29. The yield on 10-year US debt climbed to 4.07%. Bitcoin is trading at around USD 30,400.

In corporate news:

  • Apple launched an online store on Tencent's WeChat messaging application in China, accelerating the expansion of its distribution channels in one of its most important markets.
  • Bristol-Myers Squibb announced on Tuesday that its drug Opdivo combined with chemotherapy had achieved a primary endpoint in a stage III study of a type of bladder cancer.
  • Dominion Energy agreed to sell its 50% stake in the Cove Point liquefied natural gas facility in Maryland to a subsidiary of Berkshire Hathaway for $3.3 billion in cash.
  • KKR is considering options, including a sale, for its majority stake in commercial lighting manufacturer NVC China, Bloomberg reported Monday.
  • Uber CFO Nelson Chai is considering leaving the group, Bloomberg reported Monday, citing people close to the discussions.

Analyst recommendations:

  • Anglo American: Morgan Stanley maintains an in-line rating with a price target reduced from 2430 to 2320 GBp.
  • Hancock Whitney: Jefferies downgrades to hold from buy. PT up 4.6% to $42.
  • Haverty: Benchmark Company initiated coverage with a recommendation of buy. PT set to $41.
  • Helen of Troy: Canaccord Genuity raises PT to $155 from $130. Maintains buy rating.
  • Iqvia: Nephron Research downgrades to hold from buy. PT down 2% to $215.
  • JPMorgan: Jefferies upgrades to buy from hold. PT up 14% to $165.
  • Murphy Oil: KeyBanc Capital Markets initiated coverage with a recommendation of overweight. PT set to $47.
  • Rolls-Royce: Bernstein maintains its Market Perform rating with a price target raised from GBp 165 to GBp 185.
  • Truist Financial: Jefferies downgrades to hold from buy. PT down 0.6% to $32.
  • VeriSign: Baird downgrades to neutral from outperform. PT up 8.8% to $245.