The only way is up…

The Fed is on the way to winning its bet against inflation, but there’s still more to do. However, investors are already considering that inflation is behind and are dreaming of imminent rate cuts. Asking investors to exercise restraint is about as effective as trying to stop a moving train by jumping onto the tracks. When you think about it, we’ve treated Jerome Powell rather badly. Financiers have doubted his prediction of transitory inflation. They even widely criticized him, as did the media, including us. However, in recent weeks, many articles have acknowledged that he was probably right to resist market pressure and maintain his policy. In other words, he should have been trusted from the start. But that doesn't mean he's a prophet in his own country. Nor do investors listen to him when he now asserts that interest rates will not fall as quickly as the market expects.

On the road to disagreement between the Fed and the market, the first step was taken today with US inflation. Economists had forecast that prices would remain steady between October and November, bringing annual inflation down to 3.1% from 3.2% a month earlier. However, core inflation – which excludes volatile components such as food and energy) was expected to rise by 0.3% month-on-month, holding steady at 4%. This pace remains a little high in relation to the Fed's targets.

However, the consumer price index rose by 0.1% in November, data from the Bureau of Labor Statistics just showed. The flat reading didn’t happen. Core inflation, however, is in line with expectations. This fueled investor concerns that the Fed would keep its rate higher for longer and sent futures in the red, but just for a few minutes. As I write these lines, they were back in the green.

The second stage in the face-off between the central bank and investors is scheduled for tomorrow, with the Fed's last monetary policy decision in 2023. It's pretty certain that there will be no change in rates, so the market will be scrutinizing Jerome Powell's comments, while speculating on new data produced by the Fed: the latest economic expectations and, above all, the famous dot plot. Famous, that is, if you're at all interested in the subject. But this chart sums up quite precisely the position of each Fed member on the trajectory of future rates. It's an excellent indicator for understanding what's going on in the minds of central bankers and how they interpret the latest macroeconomic data.

Meanwhile, stock market records are multiplying. The German DAX and the Italian FTSE MIB have already passed their historical highs, and the Dow Jones (1.5% off its record highs) and the OMX Nordic 40 (1.7%) are getting closer. The S&P500, Nasdaq 100 and Stoxx Europe 600 still need to gain 3 to 5% to claim a new all-time high. Some major indices are a little further off the mark, such as the Swiss SMI, which is too defensive, or the UK FTSE100, which is struggling to cope with Brexit and overinflation.

In Asia Pacific, indices were slightly up. Japan, Taiwan and mainland China gained 0.2%, and Australia and South Korea 0.5%. In Hong Kong, the Hang Seng was a little more volatile, as usual, rising 1.2%, fueled by its technology heavyweights.

Today's economic highlights

UK jobless claims and the unemployment rate, as well as US CPI are on today’s agenda. 

The dollar is slightly down to EUR 0.9281 and GBP 0.7956. The ounce of gold is down to 1984 dollars. Oil is down, with North Sea Brent at USD 74.53 a barrel and US light crude WTI at USD 69.86. The yield on 10-year US debt stands at 4.22%. Bitcoin retreats to around 41,700 dollars.

In corporate news:

• Alphabet is down 1.1% in pre-market trading after losing a lawsuit against video game publisher Epic Games, the originator of "Fornite", accusing it of illegal monopoly with its Google Play online app store.
• Oracle fell 8.13% in pre-market trading, after the company published a lower-than-expected quarterly sales forecast, due to an uncertain economy and competition in the cloud computing market.
• JPMorgan Chase is set to outsource its custodian operations in Hong Kong and Taiwan, with CITIGROUP , HSBC and Standard Chartered vying for the mandate, according to two sources.
• Boeing made deeper-than-expected cuts in its ranks, halving the number of planners working in key divisions, sources said.
• Pfizer announced on Tuesday that it had agreed to surrender rights to royalties from sales of the anti-cancer treatment Bavencio in order to address concerns raised by US antitrust authorities in connection with its $43 billion acquisition of SEAGEN.
• Bristol-Myers Squibb said Monday it would pay $800 million and up to $8.4 billion to Sichuan Biokin Pharmaceutical to develop and market one of the Chinese manufacturer's cancer treatments outside China.
• Icosavax soared 45% before the opening after AstraZeneca announced it had bought the company for $1.1 billion.
• Hasbro will lay off around 20% of its workforce, the Wall Street Journal reported on Monday. The stock fell by 5.24% before the opening.
• Nvidia - The Biden administration is in talks with the company to allow it to sell certain artificial intelligence chips in China.
• Lucid - The manufacturer of luxury electric vehicles falls 4.6% before the opening after announcing the resignation of its CFO, Sherry House.
• Meta Platforms - Turkey's competition regulator said Tuesday it had launched an investigation into the group, which has linked its Threads and Instagram social media platforms.
• FirstEnergy - Activist investor Carl Icahn reduced his stake in the group by 1.5%, forcing him to give up a seat on the board.

Analyst recommendations:

• Adobe Inc.: Cowen maintains its outperform rating and raises the target price from USD 625 to USD 665.
• American Tower Corporation: Morgan Stanley maintains its market weight recommendation and raises the target price from USD 169 to USD 183.
• Amgen Inc.: Morgan Stanley maintains its market weight recommendation and reduces the target price from USD 291 to USD 281.
• Applied Materials, Inc.: Deutsche Bank maintains its buy recommendation and raises the target price from USD 155 to USD 170.
• Avalonbay Communities, Inc.: Morgan Stanley maintains its market weight recommendation and reduces the target price from USD 193 to USD 175.
• Blackrock, Inc.: BNP Paribas Exane upgrades to outperform from neutral with a price target raised from USD 675 to USD 885.
• Cdw Corporation: Morgan Stanley downgrades to equal weight from overweight with a target price of USD 216.
• Coinbase Global, Inc.: Piper Sandler & Co maintains a neutral recommendation with a price target raised from USD 80 to USD 125.
• Constellation Energy Corporation: Evercore ISI maintains its outperform rating and raises the target price from USD 12 to USD 128.
• Diamondback Energy, Inc.: BMO Capital Markets maintains its market perform recommendation and reduces the target price from 172 to USD 162.
• Emera Incorporated: JP Morgan downgrades to underweight from neutral with a target price of CAD 50.
• Equity Residential: Morgan Stanley maintains its market weight recommendation and reduces the target price from USD 69 to USD 58.
• Essex Property Trust, Inc.: Morgan Stanley maintains its market weight recommendation and reduces the target price from USD 247 to USD 227.
• First Citizens Bancshares, Inc.: JP Morgan maintains its overweight recommendation and raises the target price from USD 2000 to USD 2100.
• Fortis Inc.: JP Morgan downgrades to underweight from neutral with a price target reduced from CAD 54 to CAD 53.
• Hp Inc.: Morgan Stanley upgrades to overwt from equalwt with a price target raised from USD 31 to USD 35.
• Hubspot, Inc.: Piper Sandler & Co upgrades to overweight from neutral with a price target raised from USD 515 to USD 610.
• Ibm: Morgan Stanley maintains its market weight recommendation and raises the target price from USD 130 to USD 149.
• Kla Corporation: Deutsche Bank maintains its hold recommendation and raises the target price from USD 520 to USD 560.
• Lam Research Corporation: Deutsche Bank downgrades to hold from buy with a price target raised from USD 680 to USD 725.
• M&T Bank Corporation: JP Morgan maintains a neutral recommendation with a price target raised from USD 147 to USD 160.
• Manulife Financial Corporation: RBC Capital upgrades to outperform from sector perform with a price target raised from CAD 32 to CAD 34.
• Mastercard, Inc.: Jefferies maintains its buy recommendation and raises the target price from USD 425 to USD 480.
• Moderna, Inc.: Morgan Stanley maintains its market weight recommendation and reduces the target price from USD 115 to USD 92.
• Nike, Inc.: DZ Bank AG Research upgrades to buy from hold with a price target raised from USD 97 to USD 130.
• Oracle Corporation: Stifel maintains its hold recommendation with a price target reduced from USD 120 to USD 100.
• Phillips 66: BMO Capital Markets maintains its outperform rating and raises the target price from USD 122 to USD 140.
• Pioneer Natural Resources Company: BMO Capital Markets maintains its market perform recommendation and reduces the target price from USD 255 to USD 245.
• Regeneron Pharmaceuticals, Inc.: Morgan Stanley maintains its overweight rating and raises the target price from USD 914 to USD 941.
• Royalty Pharma Plc: Morgan Stanley maintains its overweight rating and reduces the target price from USD 57 to USD 46.
• Sba Communications Corporation: Morgan Stanley maintains its overweight rating and raises the target price from USD 227 to USD 242.
• Seagate Technology Holdings Plc: Morgan Stanley maintains its market weight recommendation and raises the target price from USD 67 to USD 72.
• Sempra: JP Morgan upgrades to overweight from neutral with a target price raised from USD 78 to USD 86.
• Shopify Inc.: DZ Bank AG Research downgrades to sell from hold with a price target raised from USD 62 to USD 65.
• Ulta Beauty, Inc.: Loop Capital Markets maintains its buy recommendation and raises the target price from USD 520 to USD 530.
• Visa, Inc.: Jefferies maintains its buy recommendation and raises the target price from USD 280 to USD 295.