According to Reuters, he said it is time for the Fed to opt for smaller interest rate hikes to avoid tightening monetary policy more than needed, and slow the pace further once risks become more "two-sided".

Futures on the S&P 500 rose 0.5% today, the Nasdaq rose 0.2 % and the Dow Jones was up 0.4%.

Monetary policy, the Chinese economy and the US mid-term elections are the main points of interest for financial markets this week. We remain in a pattern where investors are hoping that the stock market low has passed, despite the continued uncertainty about the economic outlook.

U.S. stocks rose on Friday, but this was not enough to offset the previous four sessions. So much so that the S&P500 gave up 3.4% over the week, while the Nasdaq 100 sank by 5.7%. In Europe, the Stoxx Europe 600 gained 1.5%. The main reason for this divergence is well known: the US broad index is heavily weighted in tech stocks, which are struggling this year. This explains why the Nasdaq 100, which has even more tech stocks, is down 33.5% since January 1.

The rally started on Friday is based on two pillars with rather fragile foundations. On the one hand, investors believe that monetary policy will soon be eased. This would be a buying signal for risky assets, such as equities. On the other hand, they are speculating on an end to China's zero-covid policy, which would restart one of the engines of global growth. But over the week-end, China reiterated its commitment to the zero-Covid policy and today, the country published worse-than-expected October import-export statistics.

Meanwhile, investors are eagerly awaiting the release of October inflation data in the United States on Thursday. They want to validate their theory that the central bank will soon change its policy, so the macroeconomic data must go in their direction: it must either show slowing inflation or significant damage to the economy, visible in the labor market, consumption and production. And ideally, if I may say so, a combination of these.

The US mid-term elections tomorrow are also likely to affect indexes. According to political experts, the Republican party could take back one or even both houses of Congress, which would cause much turmoil. Donald Trump is getting ready as the mid-term elections approach. There is little doubt that the former president will be seen and heard much more if his side triumphs.

 

Economic highlights of the day:

The dollar is down to EUR 0.9995 and GBP 0.8713. The ounce of gold rebounds to 1680 dollars. Oil continues to rally, with North Sea Brent crude at USD 98.56 per barrel and U.S. light crude WTI at USD 92.64. The yield on 10-year U.S. debt rallies to 4.15%. Bitcoin is trading at around 20,700 dollars per unit.

 

In corporate news:

* Apple expects lower-than-expected shipments of its iPhone 14 Pro due to health restrictions that are heavily affecting production at its subcontractor Foxconn 2317.TW's mega-factory in Zhengzhou, China. Apple shares were giving up 1% in pre-market trading.

* Meta Platforms was up 3.3% in pre-market trading in reaction to a Wall Street Journal report that Facebook's parent company plans to lay off thousands of people; an announcement to that effect could come Wednesday.

* Philip Morris International - Marlboro cigarettes maker announced Monday that it has secured 82.59% of Swedish Match as part of its $16 billion offer, while 90% is needed for the compulsory buyout of the minority shares it does not yet own. In addition, the Financial Times reported on Sunday that Philip Morris had secured the support of activist investor Elliott Management.

* Exxon Mobil will book a $2 billion loss after selling a troubled offshore oil and gas field in California that has been idle since 2015.

* Berkshire Hathaway on Saturday reported a $2.69 billion loss in the third quarter due to inflation, lower investments and a large loss related to Hurricane Ian.

* Walgreens Boots Alliance - VillageMD, a health care group majority-owned by Walgreens Boots Alliance, is close to closing a deal with Summit Health in a merger offer worth about $9 billion, including debt, The Wall Street Journal reported Sunday, citing sources.

* Airbnb and other short-term accommodation rental companies will have to share data on the number of people using their services, the European Commission proposed Monday as part of a regulation of the industry.

* Blue Apron was down 16% in pre-market trading after withdrawing its annual revenue growth forecast from 7% to 13%, citing funding uncertainties.

 

Analyst recommendations:

  • AvalonBay: Piper Sandler downgrades to underweight from neutral. PT down 4.4% to $160
  • Aveva: Exane BNP Paribas downgrades to neutral from outperform. PT down 1.4% to 3,100 pence.
  • BAE Systems: Redburn resumes buy monitoring.
  • BP Plc ADRs: Wells Fargo Securities upgrades to equal-weight from underweight. PT up 6.1% to $36.
  • Costco: Wells Fargo Securities downgrades to equal-weight from overweight. PT up 0.7% to $490.
  • Dominion Energy: Credit Suisse downgrades to neutral from outperform. PT up 2.8% to $69.
  • S&P Global: Atlantic Equities upgrades to overweight from neutral. PT up 19% to $375.
  • Shell: Goldman Sachs downgrades to neutral from buy.
  • The Estee Lauder Co: Berenberg downgrades to hold from buy. PT up 4.5% to $220.