Shares of UnitedHealth, CVS Health and Humana tumbled in premarket trading after the US government kept reimbursement rates unchanged for providers of Medicare Advantage health plans.

Wall Street was closed on Friday, and started trading again yesterday. Investors had to lower their expectations when it comes to Fed rate cuts, because the PCE inflation in the US was in line with expectations, which means that inflation is decelerating but not enough for the US central bank to sleep soundly. Jerome Powell confirmed in a speech on Friday that the best course for now was to do nothing. In addition, yesterday's ISM activity data for the United States were really solid. In short, keeping rates high isn’t hampering the growth of the economy, so why change things?

In the wake of these announcements, the traditional mechanism was set in motion: US bond yields rose (the 10-year is at 4.30%), the dollar strengthened and gold rose - setting a new record yesterday. Sometimes, the economy reacts as we think it should. Futures contracts show that the majority of financiers are still aiming for a Fed rate cut in June, but this scenario looks increasingly fragile. These same futures contracts also point to an overall rate cut envelope of 65 basis points this year. Put another way, this means that investors are hesitating between two and three rate cuts of 25 basis points in 2024 in the United States, three times less than they were hoping for at the start of the year. Under normal circumstances, this would have upset them to no end and sent stocks tumbling. But not in 2024. Better still, the Fed and the market are now more or less in sync on the trajectory of rates, in a somewhat strange consensus. Stock markets continue to enjoy this environment: they are not soaring, but more or less breaking every week the records set the week before.

In the Asia-Pacific region, China took the lead this week. PMI activity indicators, published on Sunday night, showed an upturn in the manufacturing sector. This was enough to rekindle, a little, the flame of Chinese recovery that everyone talks about but never comes. On the mainland, the CSI300 index hit a one-month high. The Hong Kong stock market, which was closed yesterday, is back up by over 2% this morning, boosted by its technology stocks and Xiaomi's surge in the wake of the presentation of its first electric vehicle. In Japan, things are more sluggish, as the yen is still flirting with the zone of extreme weakness that prompted the central bank to intervene in support at the end of 2022. Traders' caution is explained by the strong correlation between the yen's weakness and the rise in Tokyo equities. The Nikkei 225 is the best-performing major index of 2024, not unrelated to the 7% slide in the Japanese currency against the US dollar since January 1.

In other news, the situation in the Middle East worsened after an Israeli strike on an Iranian consular building in Syria. In Turkey, President Erdogan's party suffered a setback in the municipal elections, which saw the opposition triumph in the country's main cities. The leader seemed to be making amends by acknowledging the need to change his policies, while the country is hit by galloping inflation. Back in the US, Donald Trump, thanks to his supporters, posted $175 million bail on Monday in the civil fraud case against him in the State of New York, which temporarily shelters his economic empire.

Trump Media & Technology Group, which went public last week, posted just $751,500 in revenue in the fourth quarter, according to an earnings report filed yesterday. This is down more than 25% on the previous quarter. The company said it has signed just 9 million users. Shares tumbled after publication of the results. TMTG's current valuation of approximately $6.6 billion is more than 8000 times the company's revenue!

Today, we have a range of US indicators: factory orders, monthly car registrations and the JOLTS employment survey. Several speeches by Fed bankers are scheduled: John Williams (rather neutral), Loretta Mester (rather hawkish), Mary Daly (rather neutral) and Michelle Bowman (hawkish).

European leading indicators are hovering around equilibrium, after a mixed close on Wall Street yesterday: the S&P500 and Dow Jones were down, while the Nasdaq gained a few points.

Economic highlights:

On the agenda today, the second reading of March manufacturing PMI indices in Europe, the first estimate of German inflation for March, US Durable Goods Orders and the JOLTS survey. The full agenda is here. 

The dollar is worth EUR 0.9303 and GBP 0.7965. The ounce of gold is trading at USD 2257. Oil is firm, with North Sea Brent at USD 88.44 a barrel and US light crude WTI at USD 85.05. The yield on 10-year US debt rises to 4.30%. Bitcoin is trading at USD 65,000.

In corporate news:

  • Banking regulators are investigating whether Blackrock , Vanguard and State Street are confining their investments in major US banks to a passive role, the Wall Street Journal reported on Tuesday.
  • Tesla sold 89,064 electric vehicles in China in March, up 0.2% year-on-year, data from the China Passenger Car Association (CPCA) showed Tuesday. Tesla shares are down 1.5% in pre-market trading.
  • Ford, General Motors - First-quarter auto sales rose by around 5% in the U.S., according to analysts, buoyed by a sustained appetite for crossover SUVs, pickup trucks and new vehicles.
  • PVH, which owns Calvin Klein and Tommy Hilfiger, fell 25.25% in pre-opening trading, as the group forecast earnings per share for 2024 below analysts' estimates and a stable operating margin of around 10%.
  • Warner Bros Discovery announced on Monday that two independent directors had resigned from its Board of Directors.
  • T. Rowe Price, which holds around 9.3 million shares in Walt Disney, said it had voted for the directors proposed by the group, while activist hedge funds Trian Fund Management and Blackwells Capital are seeking seats on the board.
  • General Electric on Tuesday completed its demerger into three companies, GE Aerospace, GE Vernova and GE Healthcare, each listed on Wall Street.

Analyst recommendations:

  • Arthur J. Gallagher & Co.: TD Cowen downgrades to hold from market perform with a price target raised from USD 249 to USD 273.
  • BROWN-FORMAN -A: Citi downgrades to neutral from sell with a target price of USD 52.
  • BROWN-FORMAN -B: Citi downgrades to neutral from sell with a target price of USD 52.
  • Eaton Corporation Plc: Barclays upgrades to equalweight from underweight with a price target raised from USD 250 to USD 300.
  • Estee Lauder: Citi upgrades to buy from neutral with a price target raised from USD 160 to USD 175.
  • Fifth Third Bancorp: Baird downgrades to neutral from outperform with a target price of USD 32.
  • Humana Inc.: TD Cowen upgrades to buy from outperform with a price target reduced from USD 427 to USD 396.
  • Moody's Corporation: Barclays upgrades to overweight from equalweight with a price target raised from USD 375 to USD 450.
  • The Clorox Company: Citi downgrades to neutral from buy with a price target reduced from USD 170 to USD 165.
  • Willis Towers Watson Public Limited Company: TD Cowen upgrades to buy from outperform with a price target raised from USD 316 to USD 329.
  • Eli Lilly And Company: Citigroup maintains its buy recommendation with a price target raised from USD 675 to USD 895.
  • Convatec Group Plc: HSBC upgrades to buy from hold with a price target raised from GBP 2.20 to GBP 3.50.
  • Zebra Technologies Corporation: Barclays initiates an Equalweight recommendation with a target price of USD 292.
  • Ppg Industries, Inc.: Bernstein initiates an Outperform recommendation with a target price of USD 166.
  • National Grid PL: BNP Paribas Exane upgrades to outperform from underperform with a price target raised from GBX 950 to GBX 1250.
  • Bce Inc.: BMO Capital Markets downgrades to market perform from outperform with a price target reduced from CAD 54 to CAD 46.