There's still plenty of conditional, as there should be, but investors found the posture a little more conservative than they had envisaged. In fact, the Fed continues to overplay its role as the voice of doom, for the simple reason that a threat of a rate hike can have as much value and fewer consequences than a rate hike itself. The market still believes that the central bank will leave rates untouched in September, but it's not so sure that there won't be another rate hike between now and the end of the year.

As I've already said this, the bond market has a different view. The rate on 10-year US debt is flirting with 4.30%, its highest level since last October. This doesn't necessarily foreshadow further aggressive rate hikes, but it does at least imply that rates will remain high for longer than the equity market thinks. Clearly, the days of free money are not likely to return in the short term.

For the medium term, I refer you to a paper published in the Wall Street Journal yesterday, in which James Mackintosh reminds us that this looks more like a return to normal for the bond market. In classic times, which those under 20 can't remember and which others have more or less forgotten, the yield on the 10-year T-Bond hovered in the 4% zone, which corresponded roughly to the sum of the inflation target (2%) and the 2% real yield (i.e. more or less the level of economic growth). Mackintosh writes that with a current real yield of 1.9% (the level of US TIPS, inflation-protected bonds) and 2.4% projected long-term inflation, we're back to the 4.2% / 4.3% yield of the 10-year. Put another way, the bond market believes that the era of ultra-low rates is over, at least for the medium term. This obviously raises a number of questions about the structure of an economic architecture (venture capital, public and private debt, etc.) rebuilt on free money.

Meanwhile, the woes of the world's second largest economy are still causing the most concern in financial circles. In China, two limits are being reached almost simultaneously. First, there is the structural reality that the country is coming to the end of an exceptional cycle, which has enabled it to make up some of the economic ground lost to the West. It is now faced with problems that can no longer be masked by a headlong rush forward: an ageing population, debt, growing wealth disparities, etc. Then there are the cracks that unbridled growth has so far masked. Particularly in the financial and real estate systems, which have been plagued for years. Hence this summer's headlines about the difficulties encountered by many developers, and now financial institutions, in honoring their commitments to creditors and customers. All this does not inspire great confidence, which suggests that China will continue to dominate the headlines in the weeks ahead. Bad news is piling up in the country: private sector data suggest that the property market is far worse off than official statistics suggest, developer China Evergrande is under renewed investigation by the regulator, and a major player in Chinese non-bank financing has reportedly launched consultations to restructure unsustainable debt. And while we're on the subject, yesterday the PBOC injected the largest amount of liquidity into the financial system in six months, while defending the yuan.

The China/Fed combo did some damage yesterday, with indexes mostly bearish. This morning, S&P Futures and Nasdaq Futures are slightly in the green, but all the main global indices are in the red.

Economic highlights:

In the United States, weekly jobless claims and the Philadelphia Fed index are on the agenda.

The dollar is down against most currencies (EUR 0.9176 and GBP 0.7836). The ounce of gold is worth USD 1899. Oil is slightly up, with North Sea Brent at USD 84.04 USD a barrel and US light crude WTI at USD 79.97. The yield on 10-year US debt remains stuck at 4.29%. Bitcoin is trading at around USD 28,500.

In corporate news:

  • Alphabet- The health sciences division of Google's parent company is planning further cost cuts after losing more money than expected so far this year, the Wall Street Journal reported on Wednesday, citing an internal presentation. Alphabet and Verily Life Sciences did not immediately respond to Reuters' requests for comment.
  • Walmart was up 3% before the opening, as the group raised its annual sales and earnings forecasts, as its low-cost products attract more customers. Sales are expected to rise by 4% to 4.5% in 2023, compared with a previous forecast of around 3.5%.
  • Cisco - The network equipment manufacturer's CEO spoke on Wednesday of market share gains and opportunities in artificial intelligence (AI), as he sought to allay fears of slowing growth after presenting a disappointing annual sales forecast. These comments helped Cisco's share price to rally on Wednesday evening in post-closing electronic trading. In pre-market trading, the share gained 2% on Thursday.
  • Ball Corp - Britain's BAE Systems announced on Thursday that it had bought Ball Corp's aerospace business for $5.5 billion in cash. The American group, the world's largest supplier of beer cans, said it would use the proceeds to reduce its debt, pay its shareholders and increase organic growth in its packaging activities. The share gained 5.1% before the opening.
  • TPG announced on Thursday that its climate investment fund had signed an agreement to buy a majority stake in UK refrigerant gas company A-Gas. The current majority shareholder, the KKR fund, will retain a "significant" minority stake.
  • Tyson Foods - The US processed food producer is considering selling its poultry business in China, three people close to the matter told Reuters. The group has hired GOLDMAN SACHS as advisory bank on the sale, two of the sources added, indicating that the transaction is at a preliminary stage.
  • Tapestry fell by 1.5% before the opening, as the company forecast lower-than-expected sales and earnings for 2024 due to a slowdown in demand for luxury handbags and accessories in the United States.
  • Paramount has abandoned plans to sell a majority stake in BET Media Group, the Wall Street Journal reported Wednesday, citing people close to the matter. BET Media and Paramount did not immediately respond to Reuters' requests for comment.
  • US Steel Corp - ArcelorMittal is considering a possible takeover bid for the US steel producer, three sources close to the matter told Reuters on Wednesday.

Analyst recommendations:

  • Abercrombie & Fitch: UBS raised the target on Abercrombie & Fitch Co. to $42 from $32. Maintains neutral rating.
  • Charles Schwab: Citic Securities downgrades to add from buy. PT up 21% to $73.
  • Coherent Corp: Rosenblatt Securities upgrades to buy from neutral. PT up 36% to $45.
  • CommVault: D.A. Davidson & Co initiated coverage with a recommendation of buy. PT set to $85.
  • Estee Lauder: BofA Global Research cut the target to $175 from $205. Maintains neutral rating.
  • Lennox: RBC Capital Markets initiated coverage with a recommendation of sector perform. PT set to $391.
  • LondonMetric: J.P. Morgan resumes its Overweight rating, targeting GBp 225.
  • Target: Baird analyst cut the target to $165 from $190. Maintains outperform rating.
  • TJX: Wells Fargo Securities raised the target to $88 from $80. Maintains equal-weight rating.