Yields on the 10-year US Treasury note on Thursday reached their highest level since October, and this in turn is making equities less attractive. After a third week of declines for stocks, investors are still wondering whether China will act to support its real estate sector and revive its economy. They are also wondering whether or not the rate hike cycle is over in the West. The central bank symposium in Jackson Hole at the end of the week may provide some clues.

Last Friday's trading session was a tough on, with nervous investors, rising volatility, a number of traders on vacation and an August clearing session. Western stock markets all ended lower, with the exception of one of the Dow Jones, saved by Walmart, Boeing and UnitedHealth. It managed to finish in the green by a minuscule margin, at +0.01%. Not enough to reverse the trend of a difficult month for equities: -4.8% for the S&500 since August 1 and -7.5% for the Nasdaq Composite.

It's in Beijing that the current financial cracks are most visible. Chinese stocks were a favorite among investors at the start of the year. Eight months on, all but the most compulsive contrarians still want them. China's real estate sector continues to falter after years on steroids. Everyone fears a local contagion, or even a larger crisis. The world's general press has begun to take up the subject, a sign of the importance it is taking on.

Investors are waiting for a Chinese-style "whatever it takes", i.e. a spectacular blank check from the Chinese central bank or an XXL fiscal stimulus plan, if possible with four zeros in billions. Or both, why skimp? The problem is that Beijing is dragging its feet, for many of the reasons I've already mentioned in recent weeks. The PBOC was supposed to act on its 5-year rate, which is the most important for home loans. Everything was pointing in that direction, right up to the rate cuts made by the institution last week on other key rates. But then it didn't: the 5-year prime lending rate remained at 4.2% instead of falling to 4.05%. The PBOC only acted on the 1-year lending rate, reducing it from 3.55% to 3.45%. "Confusing" is the word that often comes out of the dispatches quoting Asian market specialists that I was able to read this morning. Confusing enough for the Hang Seng to lose a further 1.4% in Hong Kong this morning at the opening of the week, while other Asian markets are attempting a rebound.

We'll probably have to wait until Thursday and the start of the annual meeting of central bankers in Jackson Hole, USA, to turn our attention away from Chinese disillusionment. The market still believes that US rates won't go any higher, even if the Fed suggests otherwise. The Jackson Hole symposium may well provide an opportunity to test everyone's positions. This morning, all three Wall Street indices opened in the green.

The week's agenda also includes the August flash PMIs, which will be available on Wednesday for the world's major economies. There will also be US weekly employment and durable goods orders (Thursday) and German business sentiment and US consumer confidence (Friday). The corporate earnings season is drawing to a close, with a few stragglers such as Zoom Video, BHP, Medtronic, Baidu and Intuit. But all eyes will be on Nvidia, which will present its results and forecasts on August 23. The American group, the new paragon of artificial intelligence, recently joined the ranks of companies capable of single-handedly changing the stock market.

Economic highlights of the day:

There will be no major macroeconomic indicators today.

The dollar is slightly down to EUR 0.9182 and GBP 0.7846. The ounce of gold is almost unchanged at USD 1895. Oil rebounds, with North Sea Brent at USD 85.33 a barrel and US light crude WTI at USD 81.18.  The yield on 10-year US debt has risen to 4.28%. Bitcoin is trading at around USD 26,000.

In corporate news:

  • Citigroup is considering a plan to break up its largest division, the Financial Times reported on Monday. The institutional clients division would be split into its three main business segments: investment and merchant banking, global markets and transaction services.
  • Goldman Sachs- Malaysia may take legal action against the US bank for its role in the corruption scandal affecting the Malaysian sovereign wealth fund 1MDB, the country's Prime Minister, Anwar Ibrahim, announced on Monday in an interview with CNBC. Goldman Sachs did not immediately respond to a Reuters request for comment.
  • SoftBank-owned chipmaker Arm will file for an initial public offering (IPO) on the Nasdaq on Monday, according to several sources interviewed by Reuters.
  • Walmart and Centric Brands are investigating their supply chains in Cambodia following allegations that inmates of the country's largest women's prison were illegally employed to produce garments for export.
  • Meta Platforms plans to launch a web version of its Threads microblogging application early next week, the Wall Street Journal reported on Sunday.
  • Dupont de Nemours announced Monday an agreement to sell 80% of its Delrin resins unit to private equity firm TJC, formerly known as The Jordan Company, for $1.8 billion.
  • VmWare gains 4.6% in pre-market trading after receiving the go-ahead from the UK regulator to buy Broadcome for $61 billion, excluding debt.
  • Palo Alto Networks - The cybersecurity company is up 11.6% in pre-market trading after announcing a full-year sales forecast of between $10.9 and $11.0 billion, ahead of market estimates. It also announced positive results for the fourth quarter. Its Crowdstrike counterpart gained 2.6% in its wake.
  • AMC Entertainment is down 2.7% before the opening after Antara Capital reduced its stake in the company.
  • Permian announced on Monday the acquisition of Earthstone Energy in an all-stock transaction worth $4.5 billion, including debt.

Analyst recommendations:

  • Alphabet: Guotai Junan Securities Co., Ltd initiated coverage with a recommendation of overweight. PT set to $150.92.
  • Antofagasta plc: AlphaValue/Baader Europe now recommends buying, against a previous recommendation to add, with a downwardly revised target price of GBp 1847.
  • Astrazeneca: AlphaValue/Baader Europe now recommends buying, against a previous recommendation to add, with a price target revised downwards from 14398 to 14317 GBp.
  • Bae systems plc: Kepler Cheuvreux upgrades its recommendation from Hold to Buy, with a target price of GBp 1120, compared with GBp  983 previously. The analyst consensus for the next twelve months is 14 Buy, 5 Hold and 3 Sell, with an average rating of 4.045.
  • Estee Lauder: Morgan Stanley lowers PT to $200 from $243. Maintains overweight rating.
  • FMC Corp: J.P. Morgan initiated coverage with a recommendation of neutral. PT set to $90.
  • Hunting plc (htg ln): Investec maintains its buy recommendation with a price target raised from 400 to 445 GBp.
  • Medical Properties: J.P. Morgan downgrades to underweight from neutral. PT up 1% to $7.
  • Mitchells & butlers: AlphaValue/Baader Europe maintains its downward recommendation, with the target price raised from £205 to £210.
  • Primary health: Stifel maintains its hold recommendation with a price target reduced from 105 to 95 GBp.
  • Segro plc (sgro ln): Stifel maintains its "Hold" recommendation with a price target reduced from 800 to 775 GBp.
  • Target: CTBC Securities Investment Service Co. Ltd. initiated coverage of Target Corp. with a recommendation of neutral. PT set to $138.
  • Wise plc - a (wise ln): William O'Neil & Co Incorporated drops coverage with a previous Buy recommendation.