The Fed is expected to leave its key rates unchanged, in their current range of 5.25% to 5.5%, but it’s the words of Powell that financiers are really waiting for. I read a good summary this morning in a Bloomberg dispatch, in the words of broker Brown Brothers Harriman: "if Jerome Powell sticks to the hawkish script, the message will remain consistent and the market reaction will probably be limited". This means that if the Fed maintains a firm but constructive stance ("we're cautious, but things aren't going too badly"), equity markets are unlikely to react much. If the Fed deviates from this scenario, volatility should increase. He could spook markets with alarmist rhetoric ("you're kidding yourself if you think rates are going to fall in the short term") or give them a boost with an optimistic tone ("In fact, investors were right, we're going to lower rates as early as June"). Market bookmakers, in this case Fed Funds futures, still give a slightly favorable probability of a rate cut in June: 60% versus 40%, according to the latest CME FedWatch tool.

Overall, investor morale is good. I mean really good, since last night I picked up Bank of America's latest monthly survey of people who manage other people's money. I'll just give you the summary, as conceived by the bank itself. Growth expectations are at a two-year high. Equity allocation is at a two-year high. Investors tend to gravitate towards Europe, emerging markets and financials, BUT the most bottlenecked bet is still to go long on the "Magnificent Seven". As to whether artificial intelligence is a bubble, 45% of investors say no, 40% say yes, and 15% are clearly neither for nor against it, quite the contrary. In fact, they said they didn't know, which is probably the most sincere answer. Overall, investor sentiment hasn't been this bullish since January 2022, according to BofA, having fallen to an all-time low between late 2022 and early 2023, due to bank failures, notably SVB.

In other news, yesterday saw a minor disaster on the French market. luxury giant Kering issued a strong warning about its sales for the 1st quarter of 2024. The group explained that Gucci's start to the year has been rotten, and that the Italian label is expected to post a 20% drop in sales, dragging down group sales by 10%. This is very bad news for the group (the share lost 9 to 10% on the after-hours trading platforms) and probably a little for luxury goods as a whole.

The other big news today is that Intel reached preliminary non-binding terms with the U.S. government to receive approximately $19.5 billion in grants and loans to boost its semiconductor projects in Arizona, New Mexico, Ohio, and Oregon. The funding includes $8.5 billion from the CHIPS and Science Act and the possibility of $11 billion in federal loans. Additionally, Intel plans to utilize a 25% investment tax credit from the Treasury Department on over $100 billion in qualified investments over five years. The agreement is subject to due diligence, negotiation, and certain milestones, but the company's expansion is expected to create nearly 30,000 jobs and support over 50,000 indirect jobs. This move aligns with the U.S. government's strategy to strengthen domestic semiconductor manufacturing and national security.

Meanwhile, European regulators continue to target US big tech with fines and probes. Google was fined 250 million euros in France for intellectual property breaches. Apple received a 1.84 billion euro fine from the EU, its first antitrust penalty, after a complaint from Spotify. The EU is also investigating Microsoft's practices and its investment in ChatGPT maker OpenAI. Google may need to divest part of its adtech business to alleviate anti-competitive concerns. 

In Asia Pacific this morning, Japan is closed, but this is not stopping the yen from continuing its slide. Yesterday's slight tightening of monetary policy by the Bank of Japan did nothing to strengthen the currency. Quite the contrary, in fact, as the yen fell to JPY 151.50 to USD 1, close to the JPY 152 level that had already triggered the Japanese central bank's support operations at the end of 2022. On the region's other stock markets, India, Australia and Taiwan are losing ground. South Korea, boosted by Samsung Electronics (whose memory chips have been endorsed by Nvidia), gained 1.2%. In China, the Hang Seng and the CSI300 were up slightly after the PBOC kept rates unchanged, as expected. Leading indicators for Europe are bearish, with the Stoxx EU 600 at zero and the FTSE 100 down 0.1%. On Wall Street, Dow Jones futures is down 0.1%, S&P 500 futures is flat and Nasdaq 100 futures is up 0.1%.

Today's economic highlights:

All eyes are on the Fed. Decision at 2:00 pm and presentation conference at 2:30 pm.

The dollar is slightly up to EUR 0.9222 and GBP 0.7878. The ounce of gold is stabilizing at USD 2,152. Oil is down, with North Sea Brent at USD 86.07 a barrel and US light crude WTI at USD 81.36. The yield on 10-year US debt stands at 4.29%. Bitcoin is trading at USD 63,157.

In corporate news:

  • Tesla, which confirmed to Reuters that it would raise the price of its Chinese-produced Model Ys by 5,000 yuan (639.27 euros) from April 1, gained 0.7% in pre-market trading.
  • Nvidia, the booming artificial intelligence (AI) chipmaker, is down 0.5% in pre-market trading after closing the previous session up 1%. On Tuesday, the company announced the delivery schedule and price of its new Blackwell B200 artificial intelligence (AI) chip.
  • Alphabet - The French competition authority announced on Wednesday that it had imposed a 250-million-euro penalty on Google's parent company, Google Ireland and Google France for failing to comply with certain commitments made mandatory by a June 2022 ruling in the so-called "neighboring rights" case.
  • Boeing said it expected to spend more cash in the first quarter, as the American aircraft manufacturer also indicated that it would limit production of 737 aircraft to below 38 per month, and would only accept a fully compliant fuselage from its supplier Spirit AeroSystems. The share price fell by 2.8% in pre-market trading.
  • The head of the U.S. Federal Aviation Administration (FAA) said on Tuesday that Boeing must improve its safety culture and resolve its quality issues before the agency will allow the manufacturer to increase production of the 737 MAX after the Alaska Airlines accident in January.
  • Intel - The U.S. government announced that it would provide Intel with nearly $20 billion in grants and loans, enabling it to expand semiconductor production in the United States. Share price up 2.9% in pre-market trading.
  • Nasdaq - The stock exchange operator's shares fell 3.9% in premarket trading after it announced that Borse Dubai would sell $1.6 billion worth of shares, reducing its stake from 15.5% to 10.8%.
  • General Mills sales and earnings beat expectations on Wednesday, as higher product prices helped cushion the blow of slowing demand.
  • PDD Holdings, which operates online sales platforms in China and abroad, beat estimates for its fourth-quarter sales on Wednesday, thanks to strong growth in the number of users and sales on the Temu app. The U.S.-listed group's share price rose by more than 13% in pre-market trading.

Analyst recommendations:

  • Best Buy Co., Inc.: Telsey Advisory Group upgrades to outperform from market perform and raises the target price from USD 85 to USD 95.
  • Eqt Corporation: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 39 to USD 37.
  • Wells Fargo & Company: Citi downgrades to neutral from buy with a price target raised from USD 57 to USD 63.
  • Advanced Micro Devices, Inc.: DBS Bank maintains its buy recommendation and raises the target price from USD 187.40 to USD 227.20.
  • Hubbell Incorporated: Mizuho Securities maintains its buy recommendation and raises the target price from USD 370 to USD 450.
  • Netflix, Inc.: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 580 to USD 705.
  • Nvidia Corporation: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 850 to USD 1050. Oppenheimer maintains its outperform rating and raises the target price from USD 850 to USD 1100. DBS Bank maintains its buy recommendation and raises the target price from USD 784.60 to USD 1006.40.
  • Valero Energy Corporation: Wells Fargo maintains its equalweight recommendation and raises the target price from USD 138 to USD 171.
  • Assura Plc: Peel Hunt upgrades to add from buy with a price target reduced from GBX 55 to GBX 48.
  • Elementis Plc: HSBC upgrades to buy from hold with a price target raised from GBP 1.50 to GBP 1.70.
  • Rolls-Royce: Kepler Cheuvreux maintains its buy recommendation and raises the target price from GBX 365 to GBX 470.