I saw Bank of America's analysis of the the spirit of the moment: "Everyone thinks we're going to rally until Valentine's Day, everyone is emotionally bullish, but intellectually still bearish, and it's likely to stay that way until the guideline changes". What are the relatively predictable events that could upset the balance? Many professionals this week are pointing out that the market was so bullish in November that it is vulnerable to bad news, even the smallest.

This supposed vulnerability is based above all on the overbought zone that certain risky assets have entered. This extremism can lead to brutal reactions in the opposite direction. The most basic triggers would be macroeconomic statistics that contradict the scenario of a countdown to the first-rate cuts: a resumption of inflation, a sharp deterioration in economic activity indicators, a worsening of the real estate crisis, and so on. All things considered, this risk is not zero, but it does not seem likely to materialize in the short term, at least not spectacularly. There are also more complex and widely publicized threats, such as rising fears about the US deficit, the agony of China's real estate market or the escalation of current geopolitical tensions. On the other hand, there are other sources of disorder such as the private debt market or the fragility of shadow banking in China, for example. Finally, there's the unforeseen or ill-anticipated negative event, the infamous black swan.

Yesterday, equity markets were caught up in their recent excesses. There were a few sell-offs in the United States, Europe and Asia. The 1% drop in the Nasdaq is, for the moment, a consolidation, the word used to describe a fall in the middle of a rise. The indices that fared best were those rich in defensive players, such as the Swiss SMI.

There were a few late-night macroeconomic events. The Bank of Australia left its main policy rate unchanged at 4.35%, as economists had expected. Specialists seem to be saying that the central bank has softened its stance, without totally dropping its guard against inflation. This has not necessarily helped the equity market, as commodities have been under pressure for the past few days, particularly energy and industrial metals. We know that the Australian stock market is packed with major players in this sector. The ASX200 lost 0.9% at the end of the day, erasing its Monday rebound. Another market fell this morning on the back of some rather positive news: China. The final Caixin Services PMI for November came in at 51.5 points, well above the preliminary reading of 50.5 points. But Hong Kong and Shanghai lost 1.7% and 1% respectively. The reason for this? The absence of a marked recovery in China and the continuing capital flight illustrated by the latest statistics showing that foreign investors are withdrawing from Chinese equity markets at a steady pace. Elsewhere in the region, Japan is also struggling, with the Nikkei 225 down 1.4% and the Korean KOSPI down 0.7%. Only India stood out, with a modest rise for the SENSEX. European leading indicators are curiously robust, as they were yesterday, despite the visible contraction in US futures: The S&P Futures was down 0.35% and Nasdaq 100 by 0.55% in premarket trading.

Economic highlights of the day:

Refined version of the November services PMI indicators are published in Japan, China, France, Germany, the Eurozone and the UK. The agenda also includes Eurozone PPI, the Services PMI, the Services ISM and the JOLTS job offers. The full agenda is here: 

The dollar is worth EUR 0.9237 and GBP 0.7914. The ounce of gold is worth USD 2027. Oil suffers, with North Sea Brent at USD 78.28 a barrel and US light crude WTI at USD 73.32. The yield on 10-year US debt stands at 4.24%. Bitcoin is trading at around USD 41,925.

In corporate news:

  • Take-Two Interactive Software falls 5.4% in pre-market trading following the presentation of the trailer for the latest instalment of its video game "Grand Theft Auto VI", due for release in 2025.
  • AT&T has chosen Ericsson to build a telecommunications network using a new cost-reducing Open RAN technology that will cover 70% of its US mobile traffic by the end of 2026, the operator announced.
  • CVS Health on Tuesday forecast adjusted earnings of at least $8.50 per share for next year, in line with Wall Street expectations. The stock gained 2.9% in premarket trading.
  • Eli Lilly announced on Tuesday that its anti-obesity drug Zepbound was now available in US pharmacies.
  • Johnson & Johnson said Tuesday it expects sales growth of 5% to 6% next year, driven by sustained demand for its cancer treatments Darzalex and Carvykti and resilient sales of its blockbuster Stelara.
  • Virgin Galactic is down 3.6% in pre-market trading, having plunged 17.5% on Monday following billionaire Richard Branson's decision to rule out any further cash injections into his space travel company, according to the Financial Times.
  • Robinhood jumped 3.4% in pre-market trading, as the online brokerage platform reported a surge in crypto-currency trading in November, while bitcoin hit a 20-month high of over $42,000 on Monday.
  • Gitlab soared 18% in after-hours trading as the software development platform reported an unexpected adjusted third-quarter profit versus an expected net loss, according to LSEG data.
  • Blackstone is studying the possibility of selling Anthos Therapeutics, its biopharmaceutical subsidiary which, in partnership with Novartis, has launched a new generation of anticoagulants, according to sources close to the matter.

Analyst recommendations:

  • Albemarle Corporation: Piper Sandler & Co downgrades to underweight from neutral with a price target reduced from USD 140 to USD 128.
  • Anglo American Plc: BNP Paribas Exane maintains its neutral recommendation with a price target reduced from GBX 2330 to GBX 2200.
  • Antofagasta Plc: BNP Paribas Exane maintains its underperform recommendation and raises the target price from 1190 to GBX 1210.
  • Astrazeneca Plc: JP Morgan maintains its overweight rating and reduces the target price from GBP 140 to GBP 130.
  • Barrick Gold Corporation: BNP Paribas Exane maintains a neutral recommendation with a price target raised from USD 17.10 to USD 17.80.
  • Broadcom Inc.: BNP Paribas Exane maintains its outperform recommendation and raises the target price from USD 1030 to USD 1100.
  • Broadridge Financial Solutions, Inc.: Raymond James maintains its outperform rating and raises the target price from USD 193 to USD 205.
  • Chewy, Inc.: Baird maintains its outperform recommendation and reduces the target price from USD 40 to USD 30.
  • Compass Group Plc: Jefferies maintains its buy recommendation and reduces the target price from 2575 to GBX 2410.
  • Deere & Company: Citigroup maintains its buy recommendation and reduces the target price from USD 475 to USD 450.
  • Dollarama Inc.: Canaccord Genuity maintains its hold recommendation with a price target raised from 94 to CAD 98.
  • Fedex Corporation: JP Morgan maintains a neutral recommendation with a price target raised from USD 315 to USD 322.
  • First Quantum Minerals Ltd.: RBC Capital maintains its sector perform recommendation and reduces the target price from 38 to CAD 15.
  • Freeport-Mcmoran Inc.: BNP Paribas Exane maintains its outperform recommendation and raises the target price from USD 50 to USD 51.
  • Glencore Plc: BNP Paribas Exane maintains its outperform recommendation and reduces the target price from GBX 600 to GBX 576.
  • Gsk Plc: JP Morgan maintains its underweight recommendation and raises the target price from GBP 14 to GBP 14.50.
  • Lululemon Athletica Inc.: Cowen maintains its outperform rating and raises the target price from USD 540 to USD 545.
  • Newmont Corporation: BNP Paribas Exane maintains its outperform recommendation and raises the target price from USD 49 to USD 52.
  • Nike, Inc.: RBC Capital maintains its outperform rating and raises the target price from USD 113 to USD 120.
  • Nxp Semiconductors N.V.: Cowen maintains its outperform rating and raises the target price from USD 240 to USD 250.
  • Prologis, Inc.: Mizuho Securities downgrades to neutral from buy with a price target reduced from USD 140 to USD 125.
  • Relx Plc: BNP Paribas Exane maintains its outperform recommendation and raises the target price from GBX 3000 to GBX 3500.
  • Rio Tinto Plc: BNP Paribas Exane upgrades to outperform from neutral with a price target raised from GBX 5880 to GBX 6500.
  • Spotify Technology S.A.: KeyBanc Capital Markets maintains its overweight recommendation and raises the target price from USD 210 to USD 255.
  • Take-Two Interactive Software, Inc.: Stifel maintains its buy recommendation and raises the target price from USD 167 to USD 175.
  • The Sherwin-Williams Company: Deutsche Bank maintains its buy recommendation and raises the target price from USD 270 to USD 290.
  • Ulta Beauty, Inc.: Raymond James maintains its strong buy recommendation and raises the target price from USD 500 to USD 575.