Inflation in the US is on a downward trajectory, prompting expectations that the Federal Reserve will maintain the status quo on interest rates during tonight's session. However, the market still views a potential rate hike as a credible scenario for the meeting at the end of July. Although it appears to be almost a foregone conclusion in the short term, the anticipation for the upcoming meeting remains.

American central bankers are approaching the June meeting with a focus on effective communication. By maintaining a firm tone, they aim to encourage caution among economic players, contributing to the goal of slowing the economy and curbing overheating prices. Through the sheer force of their communication, the central bank may potentially avoid future monetary tightening. This highlights the significant impact that words can carry.

To sum up, today's prevailing expectation is that the Federal Reserve will maintain unchanged interest rates, while concurrently signaling its attentiveness to evolving economic data and the financial community. This approach aims to maintain flexibility and evaluate the circumstances between the current meeting and the next, thereby allowing for potential future actions based on emerging information.

The bond market no longer really believes in a rate cut this year. This position is consistent with the latest Bank of America survey of major asset managers, the majority of whom now expect a first rate cut somewhere in the first half of 2024, and no longer in 2023.

Equity markets remain optimistic as previously anticipated challenges have not materialized. However, the growing complacency raises concerns as it can lead to potential bubbles. Despite this, the market's underlying mechanisms are strong. Investors have relied on the resilience of the US economy and the advancements in artificial intelligence to counter rising interest rates and challenges in the Chinese economy. Strategists now question whether the market's upward trend will extend beyond technology and include other sectors. The recent revival of mid-cap companies in the US signals a positive development in this regard.

In other news, Vladimir Putin has acknowledged that the Russian army lacks a certain amount of equipment. Donald Trump pleaded not guilty to the charges brought against him in the classified documents affair. And 

On the Asia-Pacific equity markets, Japan continues to soar, with the Nikkei 225 up 1.5% this morning. Elsewhere, the picture is more mixed. Mainland China and Australia are up by around 0.3%, while Hong Kong is losing some ground. South Korea is struggling the most today, down 0.7% on the Kospi. European leading indicators are slightly down. The CAC40 lost 0.04% to 7,287 points shortly after opening.


Today's economic highlights

The US monetary policy decision is due at 2:00 pm. Prior to that, US producer prices (8:30) will dominate the session. Agenda here.

The dollar is trading around 0.9222 EUR and 0.7879 GBP. The ounce of gold trades at 1957 USD. Oil rebounded, with Brent North Sea crude at 75.20 USD a barrel and WTI US light crude at 70.30 USD. The yield on 10-year US debt stands at 3.80%. Bitcoin is stable at 26.000 USD.


In corporate news:

Activision Blizzard was down by approximately 1% and Microsoft was seen slightly lower ahead of the Wall Street opening following a favorable court decision for the Federal Trade Commission (FTC), which seeks a temporary halt to the merger between the two companies pending a hearing scheduled for next week.

Alphabet - The European Commission accused Google's parent company on Wednesday of anti-competitive practices in its digital advertising activities, which could potentially lead the company to divest a portion of its business to address concerns raised by the European authorities.

Advanced Micro Devices rose by 2.2% and Amazon by 0.4% in pre-market trading, as Reuters reported that the e-commerce giant is considering using the semiconductor company's artificial intelligence chips in its AWS (Amazon Web Services) division.

Tesla gained 2% in pre-market trading, as the automaker slightly increased the prices of its Model Y vehicles in the United States.

UnitedHealth Group declined by 4.8% in pre-market trading after the company announced during an investor conference that costs in its health insurance division could rise.

Block - BTIG initiated coverage with a "neutral" rating.

Estee Lauder - Berenberg upgraded its recommendation from "hold" to "buy".


Analyst recommendations:

  • Agree Realty: BNP Paribas Exane initiated coverage with a recommendation of outperform. PT set to $80.
  • Air Products & Chemicals: Citi initiated coverage with a recommendation of buy. Price target up 11% to $317.
  • Aston Martin: Jefferies upgrades to hold from underperform. PT set to 300 pence.
  • Catalent: Jefferies cut the recommendation to hold from buy. PT set to $44.
  • HSBC: CICC  the recommendation to outperform from market perform. Price target set to 763.55 pence
  • Modine Manufacturing: CJS Securities reinstated coverage with a recommendation of market outperform. PT set to $40.
  • Oracle: KeyBanc Capital Markets  raised the target to $133 from $120. Maintains overweight rating.
  • NXP Semiconductors: Fubon Securities initiated coverage with a recommendation of buy. PT up 15% to $225.
  • ServiceNow: Needham & Co reinstated coverage with a recommendation of buy. PT set to $660
  • Young & Co's Brewery: Investec initiated coverage with a recommendation of buy. Price target upgrades 53% to 1,840 pence.