Yesterday, the financial world was in a holding pattern, eagerly anticipating the U.S. Federal Reserve's rate decision. Most Western stock markets either stalled or slipped, with Wall Street's S&P 500 dipping 0.4%, Frankfurt's DAX down 0.33%, and London's FTSE 100 falling 0.8%. Paris, however, managed a modest 0.1% gain, buoyed by slight upticks in the luxury goods sector. Interest rate decision days often feel like déjà vu, with the same discussions replayed time and again. Yet, these moments are crucial, so let's dive into the latest chapter of this recurring saga.

The Federal Reserve is poised to trim interest rates by 25 basis points tonight, a move so anticipated that any deviation might leave investors scratching their heads. The real intrigue lies in what comes next, especially as Donald Trump II takes the helm. Jerome Powell, the Fed's steady hand, is likely to adopt a cautious approach, signaling a slowdown in the pace of future rate cuts. This strategy seems the most probable, as we await the first tangible actions from the returning chairman.

In December, the Federal Reserve kept things simple, skipping the usual forward-looking documents. But don't get too comfortable—January's meeting will come with the annual "Statement on Long-Term Objectives and Monetary Policy Strategy." March will bring the "FOMC Projection Material," offering a peek into each Fed member's crystal ball on interest rates for the short, medium, and long haul. Meanwhile, the stock market is enjoying its current cocktail of low rates, robust growth, and moderate inflation. It's even been content with the recent mix of high rates, solid growth, and slightly elevated inflation. But here's the catch: any slip in growth (if it gets too low) or inflation (if it gets too high) could spell trouble. Investors, take note—these are the imbalances to keep an eye on, and rest assured, the Fed is watching closely too.

In the ever-entwined dance of global politics and economics, the United States and China continue their intricate tango. The latest move? The White House is poised to investigate Chinese semiconductors sold stateside, citing national security concerns. Yet, this development barely ruffles the feathers of Chinese stock indices, which seem buoyed by President Xi Jinping's recent pep talk. Xi urged officials to employ scientific planning for economic recovery efforts slated for 2025. It appears that a little motivational speaking goes a long way in the Chinese markets. Meanwhile, across the pond in France, the financial scene is less upbeat. Moody's has begun downgrading the credit ratings of major French banks, a direct fallout from last Friday's downgrade of France's sovereign rating. Adding to the gloom, the Banque de France has slashed its growth forecasts for the coming years. The country is still on the hunt for a government, and once that's sorted, a coherent political strategy will be next on the agenda. But, as they say, let's tackle one challenge at a time.

This morning, Eastern stock markets are displaying a mixed bag of results. In Japan, India, and Australia, we're seeing moderate declines, while South Korea and Taiwan are enjoying relatively strong gains. Across the Pacific, US futures are looking optimistic, yet European leading indicators are showing a bit more caution.

Today's economic highlights:

UK inflation, European inflation and US building permits precede the Fed's rate decision. The full calendar is here.

  • Dollar: EUR 0.9530 GBP 0.7876
  • Ounce of gold: USD 2642
  • Brent crude: USD 73.15 WTI: USD 69.60
  • 10-year US bond: 4.43
  • Bitcoin: USD 107,000

In corporate news:

  • Bain Capital and KKR are competing to acquire Japanese IT firm Fuji Soft, with Bain ready to launch a hostile tender offer if KKR's supported second-round bid fails, amidst a backdrop of declining financial stocks and KKR's significant earnings in its asset management segment.
  • The New Zealand Commerce Commission has proposed reducing merchant service fees for Visa and Mastercard transactions, potentially saving businesses NZ$260 million annually, while Mastercard has announced a new $12 billion share repurchase program and a 15% increase in its quarterly dividend, amidst warnings from the CFPB about potential legal violations in devaluing credit card rewards.
  • Tesla faces multiple challenges including disputes with IG Metall union and accusations of union unrest, alongside management changes at its Shanghai plant and achieving over 350,000 paid subscribers through a collaboration with LiveOne.
  • The Netherlands' privacy regulator has fined Netflix 4.8 million euros for failing to adequately disclose how it processed users' personal data from 2018 to 2020, violating GDPR requirements.
  • Apple has instructed its suppliers to cease buying conflict minerals from Congo and Rwanda amid escalating regional conflicts, while facing scrutiny from Congo lawyers and denying allegations of using such materials, even as the U.S. DOJ's antitrust head, Jonathan Kanter, announces his resignation.
  • Heico reported a rise in fiscal Q4 earnings and sales with a revenue of $1.01 billion, missing Street estimates of $1.03 billion, while maintaining its semiannual dividend at $0.11 per share.
  • General Mills cut its annual profit forecast amid increased promotions and reduced prices, despite reporting higher-than-expected adjusted EPS and net sales of $5.24B for Q2 FY2023, surpassing estimates with an EPS of $1.40.
  • Jabil reported a fiscal Q1 revenue of $6.99 billion, surpassing estimates, with an EPS of $2.00, and projected Q2 revenue to be between $6.1 billion and $6.7 billion, despite a decrease in core earnings and net revenue.
  • Starbucks Workers United union is considering a strike as they approach the final bargaining stages, while consumer stocks show mixed results and US same-store sales increase by 4.8%.
  • Eli Lilly's Alzheimer's drug, Kisunla, has received approval from China's medical regulator, marking a significant expansion of its global reach.

Analyst recommendations:

  • Axalta Coating Systems Ltd.: Citi downgrades to neutral from buy with a target price reduced from USD 45 to USD 41.
  • Bill Holdings, Inc.: KeyBanc Capital Markets upgrades to overweight from sector weight with a target price of USD 115.
  • Citizens Financial Group, Inc.: Raymond James upgrades to strong buy from market perform with a target price of USD 55.
  • Dow Inc.: Evercore ISI upgrades to outperform from in-line with a target price reduced from USD 62 to USD 56.
  • Eastman Chemical Company: Citi downgrades to neutral from buy with a target price reduced from USD 118 to USD 104.
  • Electronic Arts Inc.: Stifel downgrades to hold from buy with a target price of USD 167.
  • Fluor Corporation: Baird downgrades to neutral from outperform with a target price raised from USD 54 to USD 58.
  • Halliburton Company: Barclays downgrades to equalweight from overweight with a price target reduced from USD 43 to USD 33.
  • Macy's, Inc.: Baptista Research downgrades to hold from outperform with a target price reduced from USD 19.90 to USD 18.10.
  • Match Group, Inc.: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 40 to USD 33.
  • Msci, Inc.: Goldman Sachs upgrades to buy from neutral with a price target raised from USD 617 to USD 723.
  • Oneok, Inc.: Wells Fargo downgrades to equalweight from overweight with a target price of USD 107.
  • Packaging Corporation Of America: Jefferies upgrades to buy from hold with a target price raised from USD 215 to USD 280.
  • Principal Financial Group, Inc.: Piper Sandler & Co upgrades to overweight from neutral with a target price of USD 90.
  • Renaissancere Holdings Ltd.: Jefferies downgrades to hold from buy with a target price reduced from USD 304 to USD 282.
  • Rivian Automotive, Inc.: Baird downgrades to neutral from outperform with a target price reduced from USD 18 to USD 16.
  • Sba Communications Corporation: BMO Capital Markets downgrades to market perform from outperform with a target price reduced from USD 260 to USD 230.
  • Synopsys, Inc.: Baptista Research upgrades to outperform from hold with a target price raised from USD 561 to USD 637.60.
  • Tesla, Inc.: Punto Research downgrades to sell from buy with a price target raised from USD 266.42 to USD 364.44.
  • Transocean Ltd.: Barclays upgrades to overweight from equalweight with a target price of USD 4.50.
  • Westlake Corporation: Citi upgrades to buy from neutral with a price target reduced from USD 152 to USD 140.
  • Osb Group Plc: Peel Hunt downgrades to hold from add with a target price raised from GBX 395 to GBX 414.
  • Segro Plc: Bernstein downgrades to market perform from outperform with a target price reduced from GBX 1060 to GBX 900.
  • Tullow Oil Plc: AlphaValue/Baader Europe upgrades to buy from add with a price target raised from GBX 29 to GBX 31.90.