Even the hawks at the Fed seem to have become soft as doves. It's only a short step from there to thinking that there's a coordinated communication plan being deployed by the central bank, a step I can't take for lack of tangible evidence. But there's never smoke without fire in the Fed's strategies. Yesterday, Atlanta Fed President Raphael Bostic gave a soothing speech, explaining that the U.S. central bank doesn't need to keep raising rates, and that there's no recession on the horizon. At the same time, Bostic is almost the leader of the doves… In fact, what has most impressed market participants in recent days has been a softening of bullish rhetoric from a number of hawkish officials, including Mary Daly, Lorie Logan, Christopher Waller and Neel Kashkari.

Why is the Fed orchestrating this communication effort? That's the question, especially after its conservative stance at its September 20 meeting, as seen in the famous dot plot. Perhaps the central bankers have favorable inflation statistics that the market doesn't? Or, less enthusiastically, are they alarmed by the deterioration of certain indicators? On the other hand, the impact of the emerging conflict in the Middle East seems too fresh to have played a role in this turnaround. Investors, on the other hand, are relishing the fact that the statements made by Fed members are in line with their forecasts for key interest rates.

But this was before the release of US producer prices for September early this morning. They rose for the third consecutive month, by 2.2% for the year ending in September, while a 1.6% increase was expected by analysts. On a monthly basis, they gained 0.5% against expectations of .3%. After the release, the market didn’t react much, and futures remained firmly in the green, despite this data showing that inflationary pressures are resilient. But things might change later in the day. Coming up this afternoon are the minutes of the latest Fed meeting, the content of which we know in part since the September meeting provided an update on the expectations of the institution and its members.

There’s another reason that investors remain positive, the rumor of a new Chinese economic support plan. We’ve had countless rumors announcing such plan in recent months, but it never materialized. Will this time be different? Bloomberg revealed that Beijing is considering increasing its budget deficit for 2023 in order to launch a series of measures to boost the economy. All this remains extremely vague, but it's enough to whet the appetite of financial investors.

Earnings season started yesterday, with the release of French luxury giant LVMH's third-quarter results. The group didn't fall short of expectations, but the slowdown in organic growth to ordinary levels makes the narrative of the sector's extraordinary rise in recent years harder to sustain. The share price was down sharply after the close, having already shed 12% in three months. Earlier, PepsiCo had kicked off the quarterly results season with some well-received figures. The cola maker offset the pressure on volumes with some impressive price rises: this is the seventh consecutive quarter of double-digit price increases for the group.

Economic highlights today:

Germany’s second reading of its September inflation figures, September US producer prices and the minutes of the latest Fed meeting are on the agenda. 

The dollar is trading at EUR 0.9422 and GBP 0.8122. The ounce of gold rises to USD 1870. Oil is slightly down, with North Sea Brent at USD 86.78 a barrel and US light crude WTI at USD 85.17. The yield on 10-year US debt is stable at 4.63%. Bitcoin is trading at USD 27,100.

In corporate news:

  • Exxon Mobil - On Wednesday, the oil group announced the acquisition of its American competitor Pioneer Natural Resources for around $60 billion. In pre-market trading, ExxonMobil is down 2.5% and Pioneer is up 2%.
  • HP Inc - The computer manufacturer announced Tuesday that it expects overall earnings for the current fiscal year to be in line with expectations, and has decided to raise its annual dividend. The stock gained 2.4% in after-hours trading.
  • Eli Lilly - The pharmaceutical group gained 2.5% in premarket trading in the wake of Novo Nordisk, which announced its intention to prematurely terminate a clinical trial on Ozempic due to signs showing the treatment's efficacy in diabetes.
  • Walgreens Boots Alliance - The drugstore chain announced on Tuesday that it had appointed Tim Wentworth as Chief Executive Officer, effective October 23, one month after the surprise resignation of Rosalind Brewe. The share gained 1.3% in pre-market trading.
  • Illumina is expected to get the green light from the European Commission on Thursday to sell cancer screening test maker GRAIL, after imposing a record €432 million fine on the US biotech company in July for completing its $7.1 billion takeover of Grail despite a veto from European authorities a year ago, a source with direct knowledge of the matter said on Tuesday.
  • Birkenstock - The German shoe manufacturer, which will make its stock market debut this Wednesday in New York, announced on Tuesday that it had set the price of its initial public offering (IPO) in the middle of the indicative range, at $46 per share.
  • Chevron - The oil company has made progress in negotiations with unions representing employees at its two liquefied natural gas (LNG) sites in Australia, a union representative said.
  • General Motors - The automaker reached a tentative agreement with Canadian union Unifor, just hours after strikes began at three plants.
  • Blackstone - The private equity firm is in preliminary discussions to acquire a stake in the Indian arm of Walt Disney, two sources familiar with the matter told Reuters on Wednesday.
  • Humana is down 1.3% in pre-market trading, the health insurer having announced that its long-serving CEO Bruce Broussard will step down in the second half of 2024. He will be replaced by Jim Rechtin.
  • Ally Financial is down 0.6% in pre-market trading, following the group's announcement that its CEO Jeffrey Brown will leave early next year.

Analyst recommendations:

  • Anglo amer: Berenberg maintains its hold recommendation with a price target raised from GBX 2400 to GBX 2600.
  • Arch capital: Morgan Stanley maintains its overweight/attractive recommendation with a price target raised from USD 98 to USD 100.
  • Arista networks: Piper Sandler & Co downgrades to neutral from overweight with a target price of USD 190.
  • Bae systems plc: DZ Bank AG Research upgrades to buy from hold with a target price raised from GBP 10.50 to GBP 11.90.
  • Ball corp: Barclays upgrades to overweight from equalweight with a price target reduced from USD 61 to USD 59.
  • Big yellow group: Numis downgrades to hold from add with a price target reduced from GBX 1420 to GBX 1200.
  • Chubb: Morgan Stanley maintains its equalwt/attractive recommendation with a price target raised from USD 209 to USD 224.
  • Cme group inc: Morgan Stanley maintains its equalwt/in-line recommendation with a target price raised from USD 211 to USD 215.
  • Csx corp: JP Morgan upgrades to overweight from neutral with a price target raised from USD 37 to USD 40.
  • Dow inc: Piper Sandler & Co maintains its overweight rating and reduces the target price from USD 66 to USD 60.
  • Endeavour mining: Berenberg maintains its buy recommendation and reduces the target price from CAD 44 to CAD 39.
  • Hershey: RBC Capital maintains its outperform rating and reduces the target price from USD 275 to USD 246.
  • Hubspot: Raymond James upgrades to outperform from strong buy with a price target reduced from USD 600 to USD 520.
  • Intercontinental: BNP Paribas Exane downgrades to underperform from neutral with a price target reduced from GBP 59.50 to GBP 59.00.
  • Intermediate cap: Investec maintains its buy recommendation and raises the target price from GBX 1993 to GBX 2016.
  • Nasdaq: Morgan Stanley maintains its equalwt/in-line recommendation with a target price reduced from USD 55 to USD 54.
  • Netflix: Morgan Stanley maintains its equal weight/in-line recommendation with a price target reduced from USD 450 to USD 430.
  • Palo alto networ: William O'Neil & Co Incorporated initiates coverage with a buy rating.
  • Pepsico: Morningstar upgrades to buy from sell with a target price of USD 176.
  • Ppg ind: Barclays upgrades to overweight from equalweight with a target price of USD 160.
  • Procter & gamble: RBC Capital maintains its sector perform rating with a price target reduced from USD 167 to USD 154.
  • Rio tinto plc: Morgan Stanley maintains its overweight/attractive recommendation with a price target reduced from GBX 5840 to GBX 5790.
  • Take-two interac: Raymond James upgrades to outperform from market perform with a target price of USD 170.
  • Texas instrument: Oppenheimer downgrades to market perform from outperform.
  • Travis perkins: Peel Hunt maintains its hold recommendation with a price target reduced from GBX 1070 to GBX 900.
  • Wheaton precious: Berenberg maintains its buy recommendation with a price target reduced from GBX 5000 to GBX 4700.
  • Whitbread plc: BNP Paribas Exane upgrades to neutral from underperform with a price target raised from GBX 2650 to GBX 3350.