His words have sparked a rather violent chain reaction. The yield on ten-year US debt jumped 11 points to 4.11%. The dollar took a turn for the worse. And the probability of monetary easing as early as March eroded to 57%. That said, Wall Street held up fairly well in the end, with the Nasdaq 100 ending at almost breakeven. The Dow Jones suffered more (-0.6%), but this was due to Boeing's latest stumble, with its shares plunging 8% after the FAA maintained its ban on B737MAX flights, and launched an in-depth investigation.

A number of Fed officials are also expected to speak today, including Fed Vice Chair for Supervision Michael Barr, Fed Board Governor Michelle Bowman and New York Fed President John Williams. Their words will be scrutinized by investors looking for more clues about the timing of rate cuts.

To add to investors’ troubles, the Chinese economy isn't taking off. China is traditionally the first of the major powers to unveil its GDP for the previous quarter. In this case, it was last night, and it was also the GDP for the year 2023. Chinese growth reached 5.2% last year, a little less than economists were forecasting (5.3%), but a little more than the Chinese Communist Party (CCP) was aiming for ("around 5%"). This represents an acceleration on the pace seen in 2022 (3%), a year still marked by Covid restrictions.

However, the momentum in China is slowing down compared with previous years. Above all, the rebound in consumption is less vigorous than expected, and the real estate sector continues to crack. New home prices continued to fall in December, while investment in real estate collapsed in 2023. At the same time, official statistics showed a second year of population decline, with 9 million births to 11 million deaths. Previous restrictive demographic policies and Covid contribute to the imbalance.

Many fear that the situation will get worse, particularly as regards the real estate crisis. Others believe that Beijing cannot continue to let the situation deteriorate without adopting a package of strong stimulus measures, instead of the cosmetic treatments served up for several months. The pessimists are getting the upperhand, as evidenced by the nearly 4% plunge in Hong Kong's Hang Seng index following the announcements.

Elsewhere in the news, corporate earnings releases continue at low pace, as we await acceleration next week. Oil lost some ground after reports that Western strikes against the Houthi rebels have undermined their ability to cause harm by hampering their resupply of supplies from Iran. Donald Trump confirmed that he’s still very popular. After his triumph in the Iowa primary, the former president will be battling it out in New Hampshire, where he will have a tougher time against his rivals in a less conservative state. Wall Street is not yet seriously considering whether Biden or Trump will occupy the White House in January 2025, but financiers are well aware that this is a major issue of the year. The U.S. stock market generally likes an absence of turmoil. It would therefore be satisfied with a renewal of the Democratic candidate, but is also capable of handling the return of the most outspoken Republican. If he’s confirmed as the winner of the November election, of course.

Green disappeared from the Asia-Pacific markets overnight. We have Australia at -0.3%, Japan at -0.4%, Taiwan at -1%, mainland China at -1.3%, India at -1.6%, South Korea at -2.3% and Hong Kong at -3.9%. European leading indicators are well and truly in the red today, and so are futures on the main Wall Street indices.

Economic highlights of the day:

Chinese GDP, UK inflation, Eurozone inflation, US retail sales, capacity utilization and industrial production, business inventories and the NAHB housing market index are on the agenda. 

The dollar is worth EUR 0.9230 and GBP 0.7906. The ounce of gold is down to USD 2018. Oil too, with North Sea Brent at USD 76.58 a barrel and US light crude WTI at USD 71. The yield on 10-year US debt jumped to 4.11%. Bitcoin trades at USD 42,440.

In corporate news:

  • Tesla has cut prices for its Model Y cars in Germany, a week after lowering prices for its Model 3 and Model Y in China.
  • Uber is working with Tesla to promote the use of electric vehicles by its drivers in the US, the platform told Reuters on Tuesday.
  • Walt Disney said on Tuesday that it did not support candidates for its board of directors proposed by activist shareholders, in a document filed with the SEC, the US stock market regulator.
  • Masimo, the medical technology manufacturer, announced on Tuesday that it had appointed former Walt Disney CEO Bob Chapek to its board of directors.
  • Albemarle declared its intention to reduce headcount and spending on certain projects this year, in order to cut costs, causing the stock to rise by 1.4% in pre-market trading.
  • Coinbase - The cryptocurrency group will argue at a court hearing Wednesday that the U.S. Securities and Exchange Commission should drop its case against it, a person familiar with the matter said, confirming legal documents.
  • Charles Schwab posted a smaller-than-expected decline in fourth-quarter profits. Net income fell 47% to $1.045 billion.

Analyst recommendations:

  • Accenture: BNP Paribas Exane upgrades to outperform from neutral with a price target raised from USD 345 to USD 440.
  • Ansys: Morningstar downgrades to hold from sell with a price target raised from USD 262 to USD 327. Wolfe Research downgrades to peerperform from outperform. Rosenblatt Securities downgrades to neutral from buy with a price target raised from USD 332 to USD 345. Loop Capital Markets maintains its hold recommendation and raises the target price from USD 310 to USD 373.
  • Atlassian Corporation: Wolfe Research maintains its outperform rating and raises the target price from USD 210 to USD 260.
  • Blackrock: Cowen upgrades to outperform from market perform and raises the target price from USD 819 to USD 938.
  • Block: Cowen maintains its outperform rating and raises the target price from USD 66 to USD 82.
  • Canadian Imperial Bank Of Commerce: Morningstar downgrades to hold from buy with a target price of USD 48. Morningstar downgrades to hold from buy with a price target reduced from CAD 65 to CAD 64.
  • Conagra Brands: Morningstar downgrades to hold from buy with a price target reduced from USD 33 to USD 31.
  • Crowdstrike Holdings: Daiwa Securities maintains its buy recommendation and raises the target price from USD 268 to USD 330. Capital One Securities maintains its overweight recommendation and raises the target price from USD 244 to USD 323.
  • Deliveroo: Barclays upgrades to overweight from equalweight with a price target raised from GBP 1.45 to GBP 1.55.
  • Enphase Energy: Barclays maintains its equalweight recommendation and raises the target price from USD 81 to USD 106.
  • Epam Systems: Citigroup remains neutral recommendation with a price target raised from USD 250 to USD 312.
  • Experian: Morningstar downgrades to hold from buy with a target price of USD 42. Morningstar downgrades to hold from buy with a target price of GBX 3300.
  • First Quantum Minerals: JP Morgan maintains its neutral recommendation and reduces the target price from CAD 26 to CAD 11.
  • Fortinet: Daiwa Securities downgrades to neutral from outperform with a price target raised from USD 57 to USD 62. Capital One Securities downgrades to equalweight from overweight with a price target raised from USD 59 to USD 62.
  • Imi: Goldman Sachs upgrades to buy from neutral with a price target raised from GBX 1780 to GBX 2020.
  • International Consolidated Airlines Group: Davy downgrades to neutral from outperform with a price target reduced from GBX 215 to GBX 175. Goldman Sachs upgrades to buy from neutral with a price target raised from GBX 219 to GBX 238.
  • Morgan Stanley: Keefe Bruyette & Woods downgrades to market perform from outperform with a price target reduced from USD 102 to USD 91. JP Morgan downgrades to neutral from overweight with a target price reduced from USD 94 to USD 87.
  • Palo Alto Networks: Capital One Securities maintains its overweight recommendation and raises the target price from USD 290 to USD 368.
  • Snap: Piper Sandler & Co maintains a neutral recommendation with a price target raised from USD 12 to USD 17.
  • Solaredge Technologies: Barclays downgrades to underweight from equalweight with a price target reduced from USD 74 to USD 50.
  • The Goldman Sachs Group: Morningstar downgrades to hold from buy with a target price of USD 368.
  • Uber Technologies: Mizuho Securities maintains its buy recommendation and raises the target price from USD 63 to USD 77.
  • Wise: New Street Research LLP maintains a neutral recommendation with a price target raised from 7.25 to GBP 9.
  • Wizz Air Holdings: Davy downgrades to neutral from outperform with a price target reduced from GBX 4250 to GBX 2100.
  • Zscaler: Capital One Securities maintains its equalweight recommendation and raises the target price from USD 185 to USD 233.