But let's start today's column with a mini stock market review of February. Geographically, Europe is doing well, with a large majority of markets in the green. The most notable exception was Zurich, which was penalized by the overrepresentation of defensive stocks in the SMI. Wall Street could have been partly in the green in the last session of the month, but sadly this was not the case. The Nasdaq 100 is down -0.5% in February, while the S&P500 is down 2.6%. Japan is up a nominal 0.4%. These variations come after a very favorable January for equity markets, it should be noted. Perhaps the most striking element is the underperformance of China and the emerging markets, notably Brazil, Mexico and to a lesser extent India. The financial world generally judged at the end of 2022 that they would be among the winning bets of 2023. For the moment, this remains to be proven, although we will see a little later that the game may be changing.

 

 
In the last session of February yesterday, all western indices fell, except for the Italian FTSE MIB and the Spanish IBEX. The Madrid Stock Exchange was boosted by its banking stocks, which all surged after Banco Santander announced a very optimistic strategic plan, and a series of favorable recommendations.  In the US, the S&P500 and the Nasdaq attempted a rebound but the affair ended badly and both indices finally closed down. The Dow Jones did not even attempt a bullish move, mainly because it was weighed down by Goldman Sachs. The bank's boss announced that the strategy of diversification towards individuals is a resounding failure and that a review of this activity is underway. To make matters worse, all observers found David Solomon was unclear when he spoke on the subject. Basically, he was so lame that the stock, the second largest weight in the Dow Jones, lost 3.8%. Under these conditions, the old American index could never get its head above water yesterday, and failed to reach 32,657 points, down 0.7%. The Dow Jones suffers from the comparison with other stock market references: it is its weakest closing since November 9, 2022.
 
The hearts of investors, at least those who have one, are still swaying between a renewed sense of recklessness after the purge of risky assets in 2022 and the fears of the moment, including the high rates imposed by central banks seeking to fight inflation by this means. High interest rates mean economic activity under pressure and less stock market performance. Or rather, lower stock market performance is encouraged by the uncertainty surrounding the path of interest rates. The rebound in equities that preceded the February rate hike was based on more optimistic expectations about the rate path and an economic recovery that was helped by the reopening of China with the end of the zero-covid policy. But since nothing ever really goes according to plan in economics, the lack of truly positive signals from China has robbed the market of some of its fuel.
 
This morning, that situation may be changing, with the release of much stronger-than-expected manufacturing activity indicators by Beijing. In services, too, for that matter. The statistics struck a chord because the level of momentum achieved had not been seen for a decade. As investors are quick to get excited about this kind of narrative, we can already see some spectacular consequences, such as this jump of more than 3% of the Hang Seng, which is the high-beta index of the Chinese market, a bit like the Nasdaq on Wall Street. Mainland China is a bit more measured with a 1% rise. Japanese and Australian investors have chosen to be cautious in the face of this new data. Unless they are waiting for the National People's Congress next week, where a new growth target will be announced.
 
This morning, Wall Street opened in the red as downbeat earnings from retailer Kohl's weighed on investor sentiment, despite the strong Chinese manufacturing data.
 
Economic highlights of the day:
 
Refined readings of the February manufacturing PMI indices of several economies are expected on the day, as well as German inflation for February in first estimate and new U.S. statistics, including construction spending and the ISM manufacturing index. All the agenda here. China's February manufacturing PMI accelerates to 52.6 points. Australia's Q4 GDP rose 0.5% in the quarter, below expectations.
 
The dollar is down 0.9% against the euro to EUR 0.9368 and is flat against the pound at GBP 0.8311. The ounce of gold rebounded to 1838 dollars. Oil is flat, with North Sea Brent crude at USD 83.14 per barrel and U.S. WTI light crude at USD 76.56. The yield on 10-year US debt is steady at 3.93%. Bitcoin is trading around 23,500 dollars.
In corporate news:
* Kohl's reported a surprise quarterly loss and expects full-year profit to be well below expectations, as heavy promotions to boost demand in apparel impacted the group's margins.
 
* Lowe's- The home improvement retailer expects sales to be below analysts' estimates due to sluggish demand.
 
* Abercrombie & Fitch expects annual sales growth to exceed expectations.
 
* Tesla will build a new assembly plant in northern Mexico as part of a deal worth more than $5 billion, a Mexican government official said Tuesday.
 
* HP on Tuesday reported its biggest quarterly revenue decline since 2016, due to the impact of inflation and economic uncertainty on demand.
 
* Rivian Automotive announced a recall of more than 12,700 vehicles for a problem in the seat belt system and an annual production target well below market estimates.
 
* AMC Entertainment reported a more than 15% decline in revenue and widened its losses in the fourth quarter. The movie theater chain was down 7% before the opening.
 
* General Motors is cutting hundreds of jobs to reduce costs, a source told Reuters.
Analyst recommendations:
  • Albemarle Corporation: JPMorgan Adjusts Albemarle Price Target to $250 From $320, Maintains Neutral Rating
  • BAE Systems: Berenberg downgrades from buy to hold, targeting GBp 950.
  • Columbia Banking: Wells Fargo Securities initiated coverage with a recommendation of overweight. PT up 24% to $37.
  • IHeartMedia: J.P. Morgan downgrades to underweight from neutral. PT down 31% to $5.
  • Interface: Longbow Research upgrades to buy from neutral. PT up 104% to $18.
  • J D Wetherspoon: Stifel downgrades to hold from buy. PT declines 1.6% to 560 pence.
  • KLA Corp: KGI Securities downgrades to neutral from outperform. PT up 5.4% to $400.
  • Lam Research: KGI Securities upgrades to outperform from neutral. PT up 23% to $600.
  • Smith & Nephew: Liberum upgrades from hold to buy targeting GBp 1410.
  • Watches of Switzerland: Jefferies remains Buy with a price target reduced from GBp 1500 to GBp 1300.