Investors want to know how much more policy rates will rise, and ideally for how long. And since the U.S. central bank's rates set the tempo, any information from the source is good to go. Powell will be speaking at 10 am ET, as part of his bi-annual communication to Congress. The art of communication for a central banker in the 21st century is a curious exercise. It is necessary to be reassuring, not too abstruse but still not too clear, vaguely mysterious and above all to let people believe that they know perfectly well what they are doing, even when this is not the case.

The envisaged rate peaks are getting higher and higher, but investors do not seem too upset so far. Powell will also speak tomorrow for an identical exercise before the elected representatives of the House of Representatives. The content of his speech is difficult to anticipate. Investors have become optimistic again in 2023, maybe a bit too much for some, who think this is equivalent to playing against the Fed, which has often been a bad idea in the past. But how can you blame them? An article in yesterday's Wall Street Journal illustrates the current questioning. Basically, it asks why the promised recession is always postponed to "six months from now". Everyone talks about it but no one really sees it. This makes the task of the central bankers singularly difficult, as their traditional weapons are not producing the expected effects as directly as in the past. It was better before, my grandmother would have said. A more serious commentator than her, economist Brian Wesbury of First Trust, began his weekly commentary yesterday by saying "in many ways, this is the most difficult time I've ever had to make predictions".

Equity markets, on the other hand, are itching to rise. Even though yesterday Wall Street indexes closed at their lows of the session, they did not retreat. The Dow Jones, the S&P500 and the Nasdaq 100 all gained 0.1%. In Europe, the cyclical-rich markets also rose. The French CAC40 even explored uncharted territory by touching the symbolic peak of 7,400 points during the session for the first time in its history.

Earlier today, the Bank of Australia raised its rates by 25 basis points to 3.60%, as expected. China released its import-export figures and the contraction in exports was less important than feared. In premarket trading today, indices were flat, ahead of Powell’s speech.

 

Economic highlights of the day:

European retail sales and US durable goods orders are on the agenda, along with a public speech by Fed boss Jerome Powell. All the agenda is here https://www.marketscreener.com/stock-exchange/calendar/economic/. This morning, China announced a contraction in imports and exports for the January/February period, but with slightly better than expected export figures. In other news, the Bank of Australia raised rates by a quarter point, as expected, to 3.6%.

The dollar is up slightly against the euro at EUR 0.9376 and the pound at GBP 0.8339. The ounce of gold is back under 1840 dollars. Oil is also down, with North Sea Brent crude at USD 85.69 a barrel and U.S. light crude WTI at USD 79.98. The yield on 10-year US debt rises to 3.96%. Bitcoin remains close to 22,400 dollars.

 

In corporate news:

* Meta Platforms will cut thousands of jobs this week in a new round of layoffs just months after reducing its workforce by more than 11,000, Bloomberg reported Monday. The Facebook owner's stock was up 1.6 percent in pre-opening trading.

* General Motors - Cruise, General Motors' autonomous-vehicle subsidiary, is focusing this year on cutting expenses, a top executive said Monday, even as the sector isn't growing as fast as expected.

* Rivian will launch a $1.3 billion bond issue, the electric vehicle maker announced Monday, as weakening demand and soaring costs exacerbate the cash crunch for companies in the sector. In pre-market trading, it was losing 6%.

* Weightwatchers International was up 15% in premarket trading after the company announced it would buy subscription-based telehealth platform Sequence in a deal valued at $132 million, allowing it to enter the prescription obesity drug business.

* Blackberry was down 2.5% in premarket trading after it reported a revenue forecast for this year that was below the Refinitiv consensus.

* Paramount Global is considering selling a majority stake in Bet Media Group, a source close to the matter told Reuters.

 

Analyst recommendations:

  • Abrdn: Numis Securities downgrades to add from buy. PT up 16% to 273 pence.
  • ACM Research: Morgan Stanley upgrades to Overweight From Underweight, raises Price Target to $13.50 from $10
  • Clarkson: J.P. Morgan downgrades from Overweight to Neutral with a target of GBp 3740.
  • HSBC: Jefferies remains Buy with a price target raised from 770 to 900 GBp.
  • MoneySuperMarket: Jefferies remains Buy with a price target raised from 260 to 285 GBp.
  • NuStar Energy: Stifel upgrades to buy from hold. PT up 21% to $19.50.
  • Qualtrics International: BMO downgrades to Market Perform from Outperform, raises Price Target to $18.15 from $17
  • Rolls-Royce: Barclays moves from Overweight to Equal-Weight in line with GBp 145 target.
  • United Airlines: Exane BNP Paribas upgrades to outperform from underperform. PT up 33% to $70.