Hamas's bloody surprise attack on Israel that led to retaliation in Gaza resulted in a rush to the safest assets, including gold and US Treasuries. This movement contributed to a fall in the yield on US debt, since bond yields move in the opposite direction to their price. The 10-year maturity saw its yield fall sharply from 4.80% to 4.63% this morning. Since all roads clearly lead to the US central bank, investors see the latest events in this 80-year-old conflict as reducing the likelihood of the Fed raising rates again. In the financial bestiary, while bears and bulls battle to push equity markets up and down, doves advocate a flexible, accommodating monetary policy (known as dovish) while hawks advocate an approach based on orthodoxy and firmness (known as hawkish). Equity investors naturally prefer doves, as they generally have easier access to cheaper money.

A taste for safe assets and a dove-like view of the situation are not the only justifications for yesterday's sharp easing in US rates. There's a third, also from the dove camp. Two Fed members, vice-chairman Philip Jefferson and Fed Bank of Dallas president Lorie Logan, gave dovish speeches last night. Logan, in particular, made her mark by declaring, roughly speaking, that keeping rates high for longer reduces the need for further monetary tightening, even though she is classified as a hawk. It's the kind of talk that investors want to hear, because they've been gambling for some time now, for the most part, that peak rates have already been reached.

This triplet explains Wall Street's rise yesterday, despite the chaos in the Middle East. The session was a little unusual in that it was Columbus Day, which is a holiday for Americans and for the bond market, but not for equities, which traded normally on Wall Street, albeit in sparse numbers. The Dow Jones, S&P500 and Nasdaq nonetheless gained 0.5 to 0.6% at the close, after European markets nosedived in Zurich and London, and slightly more in Paris and Frankfurt. The Paris market continued to be penalized by the pressure exerted on luxury goods stocks, particularly LVMH, on the eve of the publication of its third-quarter 2023 figures, due later today. This decline illustrates the market's strong fear of the luxury sector, whose growth could suffer from a less favorable economic climate in the West and stagnating middle-class development in China, where growth is struggling to take off again.

This is enough to provide me with a transition to the Chinese market, where the agony of developers continues. Country Garden, one of the two most talked-about players in this debacle, along with China Evergrande, warned this morning that it had defaulted on its last repayment and would have great difficulty meeting its commitments on its offshore debt (i.e. that which was not contracted on Chinese soil, but internationally). The stock is losing ground in Hong Kong, but that's not stopping the Hang Seng from smiling on a 1.3% gain, fuelled by its large technology segment. Things were less festive on the mainland, where the CSI300 lost 0.5%. The paths of Chinese equity markets are often impenetrable. The sharpest rebound of the day came from Tokyo, where the Nikkei 225 regained more than 2% after declining in five of the previous six sessions. Australia, India and, to a lesser extent, South Korea also rebounded.

Today, earnings season started with the results of PepsiCo. Third-quarter revenues totaled $23.5 billion, with net income of $3.11 billion. It expects fiscal 2023 core earnings per share of $7.54, compared with its prior forecast of $7.47. It continues to expect 2023 organic revenue to rise 10%.

There are quite a few central bankers speeches today, including ECB head Christine Lagarde and Christopher Waller or Neel Kashkari for the Fed.

Economic highlights of the day:

US wholesale inventories is the only data on the agenda today.

The dollar is stable at EUR 0.9442 and GBP 0.8166. The ounce of gold is slightly down to USD 1855. And so is oil, with North Sea Brent at USD 87.67 a barrel and US light crude WTI at USD 85.87. The yield on 10-year US debt falls sharply to 4.63%. Bitcoin trades at USD 27,400.

In corporate news:

  • Writers Guild of America (WGA) members on Monday approved a new three-year contract with major studios, including Walt Disney and Netflix .
  • Canadian union Unifor announced on Tuesday that it would launch strikes at General Motors plants in the country, as negotiations with the automaker stalled.
  • Chevron and unions representing workers at its two liquefied natural gas (LNG) facilities in Australia will meet for talks on Wednesday, after the oil and gas major asked the industrial arbitrator to help it reach an agreement with employees, who are threatening to restart strikes.
  • Truist Financial is in talks to sell its insurance brokerage unit to private equity firm Stone Point for around $10 billion, news website Semafor reported on Monday.
  • Mexico's antitrust watchdog, Cofece, said Monday that it had summoned a distributor accused of anti-competitive practices. A source familiar with the case said it was WALMART's Mexican unit.
  • Carpenter Technology - The metal manufacturer gained 1.6% in after-hours trading, after announcing that it would raise prices by an average of 7% to 12% on new non-contract orders for the majority of its high-end products.
  • PGT Innovations, a US door manufacturer, has rejected a $1.9 billion takeover bid from Miter Brands, a competitor backed by Koch Industries, people familiar with the situation said on Monday.
  • Japanese chip equipment maker Kokusai Electric, backed by KKR, on Tuesday cut the target price of its planned $730 million IPO by around 3%.
  • Unity Software gained 4.9% before the opening, its CEO leaving the company with immediate effect.

Analyst recommendations:

  • Alnylam pharmace: Bernstein maintains its outperform recommendation and reduces the target price from USD 237 to USD 218.
  • Anglo amer: Oddo BHF upgrades to neutral from underperform with a price target raised from GBP 22 to GBP 24.50.
  • Aon plc-class a: Evercore ISI maintains its in-line recommendation with a price target raised from USD 322 to USD 323.
  • Chubb ltd: Evercore ISI maintains its outperform rating and raises the target price from USD 239 to USD 241.
  • Coty: Piper Sandler cut the target to $14 from $16. Maintains overweight rating.
  • Croda intl.: BNP Paribas Exane maintains its neutral recommendation with a price target reduced from GBX 6200 to GBX 5500.
  • Dollar general c: BNP Paribas Exane starts coverage at neutral with a target price of USD 116.
  • Dollar tree inc: BNP Paribas Exane starts coverage at outperform with a target price of USD 139.
  • Estee lauder: Piper Sandler & Co maintains a neutral recommendation with a price target reduced from USD 164 to USD 155.
  • Hartford: Evercore ISI maintains its in-line recommendation with a price target raised from USD 78 to USD 79.
  • Iqvia holdings i: Mizuho Securities maintains its buy recommendation and reduces the target price from USD 250 to USD 229.
  • Juniper:  J.P. Morgan downgrades to neutral from overweight. PT up 8.1% to $29.
  • Man group: Autonomous Research maintains its neutral recommendation with a price target raised from GBX 239.54 to GBX 267.85.
  • ResMed: J.P. Morgan downgrades to neutral from overweight. PT up 8.1% to $29.
  • Skyworks: Citi downgrades to sell from neutral. PT down 11% to $87.
  • Spirent comm: Investec maintains its hold recommendation with a price target reduced from GBX 150 to GBX 100.
  • Splunk inc: Daiwa Securities downgrades to neutral from outperform with a price target raised from USD 135 to USD 157.
  • Tesla: BNP Paribas Exane maintains its underperform recommendation and reduces the target price from USD 130 to USD 120.
  • Ulta beauty: Piper Sandler & Co maintains its overweight recommendation and reduces the target price from USD 575 to USD 540.
  • Walgreens boots: Mizuho Securities maintains its neutral recommendation with a price target reduced from USD 31 to USD 25.
  • Willis towers wa: Evercore ISI maintains its in-line recommendation with a target price reduced from USD 236 to USD 233.
  • Wsp global inc: Canaccord Genuity maintains its buy recommendation with a price target raised from CAD 210 to CAD 225.