Yesterday, the US Nasdaq 100 almost erased the 4.6% gains of last Wednesday. The index is still up 10% from the low point of October 13, but momentum is fading.

"Those things might very well derail the economy and cause this mild to hard recession that people are worried about," Jamie Dimon told CNBC, adding that the $1.5 trillion that consumers saved from pandemic stimulus programs should all be spent by the middle of next year.

Bank of America CEO Brian Moynihan said at a Goldman Sachs financial conference that the bank sees recession in early 2023, but the contraction should be mild.

Meanwhile, Goldman Sachs CEO David Solomon told the Wall Street Journal he expected stocks and residential real estate to be lower a year from now, and only gave a 35% chance of a soft landing.

Indeed, the US bond market continues to say that a recession is coming. In bonds there is truth, is one of the stock markets adages. Bonds are historically the most pragmatic marker available.

This comes after the publication of weak economic data from China, where imports dropped 11% in November, while exports fell by 8.7% year-on-year to levels not seen since May 2020.

However, there is still some optimism as the country relaxes its zero-Covid policy. Authorities announced that some asymptomatic and mild cases of Covid-19 can now quarantine at home, instead of having to go to centralized government facilities.

The economic damage of the zero-Covid policy is substantial, as the November trade statistics published yesterday have shown. The authorities are forecasting growth of 5% next year, according to the latest rumors. This may sound high, but it is suboptimal for a country like China. Authorities have advocated a prudent but "focused and aggressive" monetary policy overnight. This means everything and nothing.

Finally, oil is under pressure due to fears of recession, despite the first consequences on supply of the Russian price cap by the West. In this regard, I recommend reading an article from the Financial Times on the oil tankers stuck in the Black Sea, which illustrates very well the consequences of the latest announcements - consequences that were not necessarily expected. It's called How the G7 oil price cap blocked the Bosphorus.

Wall Street is slightly up to start the day. New data from the Labor Department shows U.S. nonfarm productivity rose at a 0.8% annualized rate last quarter, revised up from the 0.3% pace reported last month, and above expectations of a 0.6% pace.

 

Economic highlights of the day:

German industrial production, a new estimate of Eurozone Q3 GDP, US labor cost and productivity data and a monetary policy decision from the Bank of Canada are on the agenda. Earlier today, the Indian central bank raised its main policy rate by 35 basis points to 6.25%, as expected.

The dollar is down to EUR 0.9500 and GBP 0.8195. The ounce of gold is also stabilizing at around 1779 dollars. Oil is up, with North Sea Brent crude at USD 80.19 per barrel and U.S. WTI light crude at USD 74.84. The 10-year US debt yield is little changed at 3.54%. Bitcoin is trading just below USD 17,000.

 

In corporate news:

*Tesla lost 2% in pre-market trading as investors feared a production cut at the U.S. automaker's Shanghai plant.

* Campbell Soup raised its annual revenue and profit forecasts after better-than-expected sales in the first quarter of its off-year.

* Microsoft said it will offer "Call of Duty" on Nintendo systems for 10 years following its acquisition of Activision Blizzard, the publisher of the shooter.

* Mastercard announced a $9 billion share buyback program.

* Southwest Airlines said it has resumed its quarterly dividend program, more than two years after suspending it following the pandemic.

 

Analyst recommendations:

  • Comstock Resources: Citi downgrades to sell from buy. PT down 5.5% to $14.
  • Coterra Energy: Citi downgrades to sell from neutral. PT down 11% to $23.
  • Dominion Energy: Wells Fargo Securities downgrades to equal-weight from overweight. PT up 9.9% to $64.
  • EQT Corp: Citi downgrades to neutral from buy. PT up 8.4% to $40.
  • Expedia: Wolfe Research downgrades to underperform from peerperform. PT down 12% to $85.
  • Hologic: RBC Capital Markets initiated coverage with a recommendation of sector perform. PT set to $75.
  • Illumina: RBC Capital Markets initiated coverage with a recommendation of outperform. PT set to $282.
  • Johnson Matthey: J.P. Morgan upgrades from neutral to underweight with a target of GBp 2000.
  • Lions: J.P. Morgan downgrades to underweight from overweight. PT up 0.6% to $7.
  • PageGroup: Jefferies upgrades from Neutral to Underperform targeting GBp 400.
  • Repligen: RBC Capital Markets initiated coverage with a recommendation of sector perform. PT set to $190.
  • Republic Services: BMO Capital Markets downgrades to market perform from outperform. PT up 8.1% to $148.
  • Southwestern Energy: Citi downgrades to neutral from buy. PT up 8.3% to $6.50.
  • TripAdvisor: Wolfe Research downgrades to underperform from peerperform. PT down 11% to $17.