As the best-case scenario lost a few points of probability, equity markets have taken a hit. With the drying up of annual corporate earnings releases, macroeconomic indicators will take on even more weight in the coming days.

Investors had a tough time last week, with all global indices giving up ground. The MSCI China was down 4.15%, the Nasdaq 100 fell 3.1%. Losses range from -2.5% to -3% for the US S&P500, the Indian Sensex or the Dutch AEX and the CAC40. The FTSE 100 lost 1.6%.

If January was a month of revival for stock markets, February sees the return of doubt. But not of gloom, since indices are not as far from equilibrium as one might think. The Nasdaq 100, for example, is only down 1% in the current month, after gains of 10.6% respectively in January. The broad US S&P500 index is down -2.6% after gaining 6.2% in January. There are two sessions left, including today, to make the final assessment of February.

What is bothering investors is the ongoing series of indicators that are no longer clearly showing that inflation is cooling. Or no longer going in the direction of a decline in prices as clearly as expected, which is not quite the same thing, but which amounts to fairly similar consequences: the confidence displayed a few weeks ago has crumbled. This is visible in US bond yields. At this point, no one really knows if this is a sign that rates will remain high for longer. Or if it's a double whammy coming: rates that go even higher and stay there for longer. It's that scenario that would be the most damaging to equity markets, especially if it comes with the recession that everyone is talking about but not seeing yet. The market will be closely watching the next set of statistics to get more clues about which scenario will prevail.

We end with a statement by Warren Buffett, made on the sidelines of the publication of Berkshire Hathaway’s annual results. "I have never yet seen a time when it was wise to make a long-term bet against America," he stressed to mark his confidence in the economy. Food for thought.

This week, earnings season is slowing down. However, there are still some big names like Occidental Petroleum, Target, Monster Beverage, Bayer, Salesforce, Reckitt, Broadcom, Costco, Merck KGaA, the London Stock Exchange or Anheuser-Busch Inbev. On the macro side, there are several highlights this week. First, US durable goods orders (Monday), then the Conference Board's US consumer confidence index (Tuesday). The final ISM manufacturing indexes for February is due Wednesday. The first estimate of Eurozone inflation in February will take over (Thursday). The week will end with the final February PMI indexes for services and the ISM services index (Friday).

This morning, Wall Street's main indexes opened higher as investors looked for bargains after the main indices recorded their worst weekly selloff of the year last week.

The Dow Jones Industrial Average was up 0.6% at just after the open, the S&P 500 gained 0.7%, while the Nasdaq 100 rose 1.1%.

 

Economic highlights of the day:

In the United States, durable goods orders and Pending Home Sales. All the agenda is here. 

The dollar is down 0.3% to 0.9447 and 0.5% to GBP 0.8322. The ounce of gold is worth $1817. Oil is stabilizing, with North Sea Brent crude at USD 82.37 per barrel and US WTI light crude at USD 75.99. The yield on 10-year US debt is climbing back up to 3.94%. Bitcoin is falling back not far from USD 23,734.

 

In corporate news:

* Berkshire Hathaway posted the largest operating profit in its history last year, despite foreign-exchange losses and lower investment returns that weighed on its fourth-quarter profit, figures released Saturday by Warren Buffett's conglomerate show.

* Pfizer is in talks to buy pharmaceutical company Seagen in a deal that could be worth billions of dollars, the Wall Street Journal reported Sunday, citing sources. In pre-market trading, Pfizer was down 1% and Seagan was up 14.6%.

* Tesla announced that its plant near Berlin, Germany, was producing 4,000 vehicles a week, three weeks ahead of schedule. The automaker's stock was up more than 2% in premarket trading.

* Broadcom is expected to receive a warning from the European Commission in the coming weeks about the possible impact of the VMWare takeover on competition, sources close to the case said.

* Pioneer Natural Resources said Friday it isn't looking to make an acquisition after Bloomberg News reported the oil and gas explorer is considering a takeover of rival Range Resources. The latter was down 7% in pre-market trading.

 

Analyst recommendations:

  • Best Buy: Telsey Advisory Group downgrades to market perform from outperform. PT down 1% to $83.
  • British American Tobacco: Jefferies remains Buy with a price target reduced from GBp 4700 to 4100.
  • Coca-Cola: Baptista Research initiated coverage with a recommendation of outperform. PT up 17% to $70.30.
  • GSK: Goldman Sachs upgrades from Sell to Buy. The target price remains set at GBp 2000.
  • Hikma: Berenberg remains "Hold" with a price target raised from GBp 1440 to GBp 1740.
  • Mondi: Jefferies remains Buy with a price target reduced from GBp 1730 to GBp 1710.
  • Rightmove: HSBC moves from light to hold, targeting GBp 530.
  • Shell: Goldman Sachs increases its rating from Neutral to Buy.
  • State Street: Wells Fargo Securities upgrades to overweight from equal-weight. PT up 12% to $98.
  • Zillow: J.P. Morgan initiated coverage of Zillow Group Inc. Class C with a recommendation of overweight. PT set to $48.