Stock market indexes are nearing their record highs once again, having recovered from a slight dip in April. The initial panic in the US market, driven by fears of no interest rate cuts this year, has subsided amid a flurry of weak macroeconomic data. Since the start of the month, over half of the major US indicators have fallen short of expectations. The ISM's indicators for both manufacturing and services sectors slipped into contraction in April. Additionally, all three key components of the April employment report - hourly earnings, the unemployment rate, and job growth - were underwhelming. Yesterday saw an increase in weekly jobless claims, and this morning, all eyes are on the preliminary figures for the University of Michigan's consumer confidence index. The crucial American consumer remains a bastion of stability. If consumer sentiment does falter, it could cast a shadow over the economic forecast, which, paradoxically, might not displease Wall Street. A stack of negative indicators could lead the Fed to soften its stance, potentially lowering interest rates and making capital cheaper in the foreseeable future. However, it’s important to recognize that interpreting these data points is notoriously imprecise. For instance, the Atlanta Fed's real-time GDP model currently projects an annualized growth rate of 4.2% for the second quarter of 2024 in the US, an increase from last week’s estimates.

In the short term, the market has reverted to a mindset where "anything that doesn't make the Fed worry about a resurgence of inflation is good for stocks." All three Wall Street indexes finished in positive territory, with the Dow Jones notably strong, climbing 0.85% and nearing the elusive 40,000-point mark, a level it has never surpassed.
 
In Europe, indexes are similarly edging towards new highs. Nearly all ended yesterday with robust gains, except for one notable outlier which I'll touch on in a moment. Comments from the Bank of England that downplayed concerns about price trends bolstered expectations of a rate cut by the European Central Bank, anticipated in their next meeting on June 6. This suggests that ECB monetary easing could be less than a month away. The exception in Europe was the Bel20, which fell by 0.75%, diverging from the gains seen in other indexes. It suffered from declines in its two largest holdings, UCB (down 2%) and particularly ArgenX (down 5%). The biotech firm saw its stock drop after releasing results that were in line with expectations but included higher-than-expected costs, which, however, did not overly concern analysts.

The White House is said to be gearing up to deliver a significant hit to Chinese imports. Credible sources indicate that Joe Biden will introduce new tariffs next week targeting "strategic" sectors, including electric vehicles, semiconductors, and photovoltaic equipment. Earlier this year, Washington initiated investigations into dumping practices in other industries, such as shipbuilding and logistics. Despite these actions, the American president has consistently stated that he does not seek a trade war with China. The stakes in this high-stakes game of liar's poker are only escalating, particularly as political maneuvering intensifies with the approaching US presidential election in November. Simultaneously, while Xi Jinping visited France, Serbia, and Hungary this week, Rishi Sunak is reportedly overwhelmed with requests from HSBC Holdings and Standard Chartered to moderate the UK government's stance towards Beijing

The week ends in the green in Japan, where the Nikkei 225 gains 0.4%. There was a sharp contrast between Hong Kong and mainland China. The former gained 1.9%, boosted by rumors of a tax exemption on dividends for individuals investing within a certain framework, while the latter lost 0.2% due to threats of increased tariffs in the USA. South Korea, India, Taiwan and Australia ended the week on a positive note. 

Economic highlights of the day:

University of Michigan's consumer confidence index at 10:00am. Full agenda here.

The dollar rises to 0.9277 EUR and 0.7979 GBP. The ounce of gold rebounds to 2371 USD. Oil too, with North Sea Brent at 84.35 USD a barrel and US light crude WTI at 79.50 USD. The yield on 10-year US debt falls to 4.46%. Bitcoin is trading at 63,000 USD.

In corporate news:

  • Ford - The American automotive safety regulatory authority announced on Friday that it is opening a preliminary investigation into 210,960 Ford vehicles following complaints of fuel leaks.
  • The shares of gold mining companies are advancing in pre-market trading as the price of gold rises. Newmont and Barrick Gold are each up by 1.8%.
  • The artificial intelligence technology group SoundHound is up 15.6% in pre-market trading after raising the lower end of its annual sales forecast range.
  • The cybersecurity group Gen Digital is up 4.9% in pre-market trading after reporting slightly higher than expected revenue for the fourth quarter.
  • The cloud computing group Akamai Technologies dropped 8.9% in post-market trading on Thursday as it anticipates lower than expected revenue in the second quarter.
  • Insulet reported on Thursday a first-quarter profit below expectations, weighed down by increased marketing expenses.
  • The medical equipment manufacturer Mettler-Toledo International raised its annual profit forecast on Thursday despite ongoing weak demand expected to continue into the second quarter.

Analyst recommendations:

  • Akamai Technologies: RBC Capital maintains its sector perform recommendation and reduces the target price from USD 115 to USD 92.
  • Bank Of New York Mellon Corporation: Deutsche Bank maintains its hold recommendation with a price target reduced from USD 59 to USD 57.
  • Blackrock: Deutsche Bank maintains its buy recommendation and reduces the target price from USD 919 to USD 901.
  • Blackstone: Deutsche Bank maintains its buy recommendation and reduces the target price from 138 to USD 136.
  • CME Group: Deutsche Bank maintains its hold recommendation and reduces the target price from 210 to USD 205.
  • Entergy Corporation: Ladenburg Thalmann maintains its buy recommendation and raises the target price from USD 100 to USD 117.
  • Epam Systems: Jefferies remains at hold with a target price reduced from USD 283 to USD 202.
  • Franklin Resources: Deutsche Bank maintains its hold recommendation with a price target reduced from USD 24 to USD 23.
  • Hartford Financial Services Group: Redburn Atlantic maintains its buy recommendation and raises the target price from USD 110 to USD 115.
  • Hubspot: Citigroup maintains its buy recommendation with a price target reduced from USD 798 to USD 767.
  • Mondelez International: Baptista Research downgrades to outperform from hold with a price target reduced from USD 82.20 to USD 81.20.
  • Newmont Corporation: BNP Paribas Exane maintains its outperform recommendation and raises the target price from USD 49 to USD 52.
  • Paypal Holdings: Baptista Research upgrades to outperform from underperform with a price target raised from USD 56.10 to USD 74.30.
  • Roblox: BTIG maintains its buy recommendation and reduces the target price from USD 54 to USD 46.
  • Starbucks: Baptista Research upgrades to outperform from hold with a price target reduced from USD 104 to USD 86.10.
  • T. Rowe Price Group: Deutsche Bank maintains its hold recommendation with a price target reduced from USD 118 to USD 116.
  • Target: JP Morgan maintains its neutral recommendation and raises the target price from 180 to USD 185.
  • Walmart: Telsey Advisory Group maintains its outperform recommendation and reduces the target price from USD 205 to USD 68.
  • Warner Music Group: Evercore ISI maintains its outperform recommendation and reduces the target price from USD 42 to USD 40.