Yesterday's US inflation data for August had an interesting impact on the markets. Typically, when data support easing monetary policy, we see bond yields decrease and growth stocks perform well. However, the price dynamics in this case were a bit stronger than expected, landing on the higher end of projections. This could be described as a controlled increase in inflation, largely driven by rising energy prices. It's crucial to note that despite this uptick in inflation, the overall market consensus still favors maintaining current US interest rates when the decision is made on September 21. While the Fed may continue to discuss the possibility of a final rate hike in the coming weeks due to this slight increase in price pressure, it's unlikely to materialize. This has been the market's expectation for several weeks now. Nevertheless, it's important to remain cautious, as ING points out: "If energy prices continue to rise, and there's a labor strike in the US auto industry (which significantly affects inflation through vehicle prices), the situation could change".

In the equity markets, the Nasdaq 100 rose by 0.38%, and the S&P500 increased by 0.12% following the drop in inflation figures. However, the Dow Jones remained in the negative at -0.2%, mirroring the earlier performance of European indices. On Thursday at 8:15 am, the ECB will announce its decisions on interest rates, with the eurozone experiencing higher inflation (5.3% in August) compared to the US (3.7%), despite having lower key rates (4.25% for the refi rate and 5.33% for the Fed Funds rate). Additionally, economic momentum in the US is slower than in Europe, as indicated by PMI activity measures in both industry and services.

Let's delve into the ECB's upcoming decision. The central bank is facing its typical dilemma: should it raise rates to control inflation, risking potential harm to the economy, or should it maintain the status quo to protect the economy, even if it means prices may continue to rise? According to reliable sources, the debate within the ECB is expected to be intense, and there is more suspense surrounding this decision than usual. Out of 66 economists surveyed by Bloomberg, 34 anticipate the status quo, while 32 are betting on a rate hike. This division is noteworthy. Money markets, however, have a clearer stance, with a roughly 66% probability of a rate hike. Notably, not long ago, these same markets were leaning towards maintaining the status quo, but the increase in energy prices has shifted the outlook.

In the world of equities, technology continues to dominate the spotlight. The excitement surrounding the British semiconductor designer, Arm, remains strong. Its IPO price on Wall Street has been set at USD 51 per share, hitting the upper end of expectations. There was even a moment when some believed SoftBank, the owner, might set it at USD 52. The stock is scheduled to begin trading this afternoon on Wall Street, and the question lingers whether it will become a subject of fervent speculation. It's worth noting that, according to LSEG, the ten largest US IPOs in the past four years have, on average, lost 47% from their closing price on the first day of trading. Among these deals, only Snowflake and Airbnb have fared well, with their shares currently trading at or well above their IPO levels.

Yesterday, Apple faced a different story. The company has been under scrutiny by Chinese authorities, who have announced measures to restrict iPhones among the country's political and economic leaders. As is customary, Beijing doesn't communicate directly but instead releases tidbits of information through official channels. The most recent concerns revolve around doubts regarding device security. Given that China is a vital market for Apple, the impact on the company's stock has been significant, with a decline of over 7% in just a few sessions, amounting to a loss of $250 billion in market capitalization.

In the current market activity, Japan is performing well, with the Nikkei 225 up 1.5%. South Korea is also doing solidly, with the KOSPI up by 1%, and Australia is up by 0.6%, albeit to a lesser extent. However, India remained relatively stagnant, and China experienced some declines, particularly in Hong Kong and Shanghai. The Chinese indices were influenced to a degree by the automotive sector due to the EU's recent announcement of protective measures for the European industry against the aggressive policies of Chinese electric vehicle manufacturers in Europe.

Economic highlights of the day

The day's schedule includes Japan's industrial production figures at 12:30am. In the afternoon, the focus shifts to the eurozone, with the ECB's decision on three rates (deposit facilities, refinancing, and the marginal lending facility) at 8:15am. In the US, new jobless claims, producer prices, advanced retail sales, and business inventories will be released at 8:30am and 10:00am. Full agenda here.

The dollar is stable at 0.9318 EUR and 0.8022 GBP. The ounce of gold is trading around 1907 USD. Oil stabilizes at high levels, with North Sea Brent at 92.78 USD a barrel and US light crude WTI at 89.01 USD. The yield on 10-year US debt falls to 4.22%. Bitcoin trades at USD 26,300.

In corporate news:

  • Apple, Alphabet, Microsoft and Amazon advanced by between 0.2% and 0.6% in pre-market trading on the back of an easing in the US bond market, with the yield on two-year Treasuries falling below 5%.
  • HP Inc. fell by 1.2% in premarket trading after Warren Buffett's Berkshire Hathaway sold 5.5 million shares in the PC manufacturer.
  • Arm Holdings, which makes its Nasdaq debut on Thursday, benefits from New Street Research's "buy" rating on the British computer chip designer, valued at $54.5 billion for its IPO, the largest in the US since late 2021.
  • VISA is down 1.3% in pre-market trading, as the payment group has announced that it intends to submit a proposal to its shareholders to convert Class B shares into Class C or A shares, which Jefferies believes could put pressure on the stock in the event of a favorable vote.
  • Starbucks drops 0.8% in after-hours trading following the announcement that CEO Howard Schultz is stepping down from the coffee chain's board of directors.
  • Metlife - Jefferies upgrades its recommendation to "buy" from "hold".
  • Prudential Financial - Jefferies upgrades its recommendation from "underperform" to "hold".

Analyst recommendations:

  • Aflac: Jefferies maintains its hold recommendation. Previously set at $70, the target price has been raised to $74.
  • Arista Networks: Rosenblatt Securities Inc. upgrades to buy from hold. PT up 21.1% to USD 230.
  • Arthur J. Gallagh: Goldman Sachs maintains its Buy rating on the stock. Previously set at USD 249, the target price has been raised to USD 255.
  • Cadence Design: KeyBanc Capital Markets upgrades to overweight from neutral. PT up 7.4% to USD 290.
  • Carrier Global: Mizuho Securities downgrades to neutral from buy. PT reduced from USD 63 to USD 61.
  • Centene: Zacks maintains a neutral recommendation on the stock, with the target price raised from $67 to $70.
  • Coca-cola: Morningstar upgrades to hold from sell. PT up 3.4% to USD 60.
  • Corebridge Financial: Jefferies maintains its Buy rating. Previously set at USD 22, the target price has been raised to USD 23.
  • Darden Restaurant: KeyBanc Capital Markets downgrades to neutral from overweight. PT down 5.4% to USD 175.
  • Dr horton: Zacks downgrades to neutral from outperform. PT down 17.1% to USD 121.
  • Duke energy: Barclays maintains an overweight rating on the stock. The target price has been raised from USD 96 to USD 97.
  • Enphase energy: Goldman Sachs downgrades to hold from buy. PT reduced from USD 217 to USD 199.
  • Etsy: Wolfe Research upgrades to outperform from peerperform. Target price raised to USD 100.
  • FedEx: Goldman Sachs maintains its Buy rating. Previously set at USD 269, the target price has been raised to USD 278.
  • Franklin: Goldman Sachs downgrades to sell from neutral. PT down 2.02% to USD 24.
  • Match group: Evercore ISI upgrades to outperform from neutral. PT up 20% to USD 60.
  • Metlife: Jefferies upgrades its recommendation from hold to buy. The target price has been raised from USD 58 to USD 72.
  • Moody's: Wolfe Research upgrades to outperform. PT remains at USD 390.
  • Palantir technology: Guotai Junan Securities Co., Ltd. upgrades to overweight. Target price remains at USD 20.50.
  • Palo Alto Network: Zacks maintains a neutral recommendation with the target price raised from USD 246 to USD 258.
  • Principal Financial: Jefferies downgrades to hold. PT reduced from USD 69 to USD 66.
  • Prudential financial: Jefferies upgrades to hold from underperform. PT up 32.9% to USD 93.
  • Republic: Zacks maintains a neutral recommendation on the stock. The target price has been revised from $159 to $160.
  • S&p global: Wolfe Research upgrades to outperform. PT remains at USD 453.
  • Solaredge: Goldman Sachs downgrades to hold from buy. PT reduced by 11.9% to USD 311.
  • T rowe price: Goldman Sachs downgrades to sell from neutral. PT reduced from USD 102 to USD 98.
  • Tjx: Zacks maintains a neutral recommendation on the stock. The target price has been raised from $92 to $98.
  • United parcel: Cowen maintains a market perform rating. The target price has been lowered from USD 190 to USD 185.
  • Welltower: Mizuho Securities maintains its Buy rating. Previously set at USD 86, the target price has been raised to USD 90.