With a 52% rise in 2023, the Nasdaq 100 is a perfect illustration of the reawakening greed of investors, after a bitter-tasting 2022 vintage. The tech index is within 1% of its record, after seven consecutive weeks of gains. But other markets are already at their peak, including Paris, Frankfurt, Amsterdam and Milan. The prospect of imminent rate cuts is the main engine of growth, even though central banks are telling investors that the pace of monetary easing will be slower than they think. But beyond this debate, what matters the most to financiers is that the slope on rates has become bearish, meaning that money will be cheaper in the months ahead. For the time being, this is a powerful driver for equities, outweighing fears about the damage already caused by high interest-rate policies and the possible resurgence of inflation.

Bank of America, which has a knack for producing a dense, interesting and sometimes unreadable strategy document every week, is announcing 152 rate cuts in 2024. All central banks combined, of course. But it gives an idea of the underlying trend. However, central banks know that investors are easily seduced. That's why they started throwing their hawks into the fray at the end of last week. The hawks are the more conservative central bankers, those perceived by investors as killjoys. Reasonable people think of hawks as the guardians of the temple, the ones who prevent their more naïve counterparts, the doves, from letting their emotions get the better of them.

Well, the hawks are out. New York Fed boss John Williams, Atlanta Fed boss Raphael Bostic and their Chicago Fed colleague Austan Goolsbee have all said in public over the past three days that the financial markets are wrong to be betting on massive rate cuts. Added to this were statements by Christine Lagarde for the ECB and Tiff Macklem for the Bank of Canada, who also sought to calm investor ardor over the pace of monetary easing policies. The pile-up of speeches has pushed back a little the rate cut projections envisaged by the market in 2024, but there is always a gap between what central bankers say and what the market believes. The Bank of Japan's meeting this week won't provide much clues for either side: the BoJ operates in a world of its own, still dominated by negative rates. No major decisions are expected on Tuesday, but economists believe that Governor Kazuo Ueda will pave the way for a rate hike in April.

The week's agenda includes the Bank of Japan's latest 2023 monetary policy decision (Tuesday) and US PCE inflation (Friday). The final earnings releases of the year include Accenture, Fedex, Micron and Nike.

In the Asia-Pacific region this morning, only the Indian and Korean markets were up slightly. Other markets are dominated by profit-taking, notably Tokyo (-0.6% for the Nikkei 225), Hong Kong (-0.9% for the Hang Seng) and Sydney (-0.2%). European leading indicators are bearish, except the FTSE 100. Futures on the main Wall Street indexes were flat in premarket trading.

In other news, Adobe and Figma have mutually agreed to terminate their planned $20 billion acquisition deal due to regulatory concerns from the UK Competition and Markets Authority and the European Commission. The decision was made after the UK regulator provisionally found that the acquisition could harm competition and innovation in product-design software.

Economic highlights of the day:

The German Ifo business confidence index and US house prices for December, compiled by the NAHB, are the main indicators. The full agenda is here. 

The dollar is trading at EUR 0.9153 and GBP 0.7894. The ounce of gold is firm at USD 2023. Oil rises, with North Sea Brent at USD 78.35 a barrel and US light crude WTI at USD 73.39. The yield on 10-year US debt is 3.90%. Bitcoin is trading at USD 41,300.

Things to read today:

  • Apple - More and more Chinese government agencies and state-owned enterprises across the country have asked their staff not to bring iPhones and other devices from foreign groups to work, Bloomberg reported on Friday. The stock lost 0.7% before the opening.
  • IBM announced on Monday that it had acquired Software AG's StreamSets and webMethods platforms for 2.13 billion euros, to strengthen its artificial intelligence (AI) and hybrid cloud offerings.
  • United States Steel soars 29% in pre-market trading following the announcement of its takeover by Japanese group Nippon Steel for $14.9 billion, including debt.
  • Illumina is to sell its stake in GRAIL after a two-year dispute with the competition authorities. The group gains 5.4% in pre-market trading.
  • Nio climbs 10.7% in pre-market trading after announcing the signing of an agreement with CYVN Holdings, an Abu Dhabi-based investment vehicle, for the latter to inject $2.2 billion into the Chinese electric vehicle manufacturer.
  • SouthWest Airlines will settle a $140 million fine, a record amount for a civil suit, in litigation related to the cancellation of 16,900 flights and the blocking of two million passengers in December 2022, the US administration said on Monday.
  • Citigroup - The bank's plan to set up an investment bank in China is taking longer than expected, as it has to comply with local data laws, Bloomberg reported on Monday.
  • Blackrock, StateStreet - The U.S. House of Representatives Judiciary Committee announced that it had subpoenaed the two groups as part of its investigation into whether their ESG (environmental, social and governance) efforts comply with competition rules.
  • KKR announced on Friday that it had acquired a $7.2 billion portfolio of high-yield loans backed by recreational vehicles from BMO Financial Group.
  • Arcutis Biotherapeutics - The dermatology company gained 16% in pre-market trading after the FDA approved its drug for the treatment of a chronic skin disease.
  • Meta Platforms - Canadian Prime Minister Justin Trudeau said Friday that Ottawa would continue to pressure the group to pay Canadian news publishers for content shared on Facebook, but the American group said it would rather block information sharing than pay.

Analyst recommendations:

  • Abbvie: HSBC downgrades to hold from buy with a price target reduced from USD 167 to USD 156.
  • Accenture: BNP Paribas Exane maintains a neutral recommendation with a price target raised from USD 280 to USD 345.
  • Anglo American: AlphaValue/Baader Europe maintains its buy recommendation and reduces the target price from GBX 3094 to GBX 2864.
  • Archer-Daniels-Midland: BMO Capital Markets downgrades to market perform from outperform with a price target reduced from USD 90 to USD 80.
  • Astrazeneca: Baptista Research upgrades to outperform from hold with a price target reduced from USD 79.30 to USD 78.20.
  • Bank Of New York Mellon: JP Morgan upgrades to overweight from neutral with a target price raised from USD 49 to USD 54.50.
  • Blackrock: Deutsche Bank maintains its buy recommendation and raises the target price from USD 740 to USD 895.
  • Blackstone: Deutsche Bank maintains its buy recommendation and raises the target price from USD 108 to USD 141.
  • Block: JP Morgan maintains its overweight rating and raises the target price from USD 70 to USD 90.
  • Chubb: Wells Fargo downgrades to equalweight from overweight with a price target reduced from USD 253 to USD 240.
  • Citigroup: Daiwa Securities upgrades to buy from neutral with a price target raised from USD 43 to USD 63.
  • Equifax: Jefferies upgrades to buy from hold with a price target raised from USD 200 to USD 315.
  • Exelon: Morgan Stanley downgrades to equalwt from overwt with a price target reduced from USD 45 to USD 38.
  • Fifth Third Bancorp: JP Morgan maintains a neutral recommendation with a price target raised from USD 26 to USD 34.50.
  • Franklin Resources: Deutsche Bank maintains its hold recommendation and raises the target price from USD 24 to USD 30.
  • Fresnillo: Morgan Stanley downgrades to underweight from equal weight with a target price reduced from GBX 620 to GBX 540.
  • Gsk: HSBC maintains its reduce recommendation with a price target raised from 11.90 to GBP 12.
  • Huntington Bancshares: RBC Capital maintains its outperform rating and raises the target price from USD 12 to USD 15.
  • Illumina: Leerink Partners maintains its outperform recommendation and raises the target price from USD 140 to USD 170.
  • Intel: DZ Bank AG Research maintains its hold recommendation with a price target raised from USD 38 to USD 48.
  • Jpmorgan Chase: Daiwa Securities upgrades to buy from outperform with a price target raised from USD 167 to USD 200.
  • KKR & Co: Deutsche Bank maintains its buy recommendation and raises the target price from USD 92 to USD 114.
  • M&T Bank: Deutsche Bank downgrades to hold from buy with a target price of USD 145.
  • Mettler-Toledo International: Baptista Research upgrades to buy from hold with a price target raised from USD 1450 to USD 1491.40.
  • Monolithic Power Systems: Deutsche Bank maintains its buy recommendation and raises the target price from USD 500 to USD 660.
  • Northern Trust: Deutsche Bank maintains its hold recommendation and raises the target price from USD 65 to USD 80.
  • Palo Alto Networks: Raymond James downgrades to market perform from outperform.
  • Progressive: Wells Fargo upgrades to overweight from equalweight with a price target raised from USD 144 to USD 176.
  • Prologis: JP Morgan upgrades to overweight from neutral with a price target raised from USD 123 to USD 148.
  • Salesforce.com: Wolfe Research upgrades to outperform from peerperform with a target price of USD 315.
  • Charles Schwab: Deutsche Bank maintains its buy recommendation and raises the target price from USD 66 to USD 84.
  • Solaredge Technologies: Goldman Sachs downgrades to sell from neutral with a target price of USD 77.
  • Truist Financial: JP Morgan maintains a neutral recommendation with a price target raised from USD 29 to USD 36.
  • Unitedhealth Group: HSBC downgrades to reduce from hold with a price target reduced from USD 550 to USD 480.
  • Unity Software: Jefferies maintains its hold recommendation and raises the target price from USD 23 to USD 36.
  • Us Bancorp: JP Morgan maintains its overweight recommendation and raises the target price from USD 36 to USD 45.
  • Welltower: JP Morgan upgrades to overweight from neutral with a target price raised from USD 92 to USD 99.