Yesterday, stock markets were a sea of green. In the US, it was a lush, dark green, while Europe sported a more pastel shade. The Nasdaq 100, the go-to index for measuring market risk appetite, jumped 2.5%, marking its fourth consecutive day of gains. Investors are once again flocking to their favorite bets: Nvidia for AI, Eli Lilly for weight-loss drugs, and Tesla for... well, who really knows? The most profitable bet of the day was the Starbucks-Chipotle pair, with Starbucks up 24.5% and Chipotle down 7.5%. Brian Niccol, the man who turned Chipotle around, is now set to rescue Starbucks from its slump. One man's promotion is another man's demotion.

The ongoing rally in US equities got a boost from a modest rise in US producer prices (PPI) in July, which was lower than expected. This joins a slew of below-expectation data, bolstering hopes for a Fed rate cut next month. Even Raphael Bostic, one of the Fed’s staunchest hawks, struggled to argue against monetary easing (though he gave it a valiant effort). The favorable PPI reading had investors optimistic that today’s US consumer price index (CPI) would also be tame. While the correlation between PPI and CPI isn’t always clear, it was reasonable to expect a low CPI, and that's what happened. In July, consumer prices made a modest comeback, rising by 0.2%, after a brief dip of 0.1% in June, according to the Bureau of Labor Statistics. Over the past year, the Consumer Price Index (CPI) increased by 2.9%, down from a 3.0% rise in June. Economists had predicted this exact scenario. It’s almost like they have a crystal ball—or just really good data models. Inflation is now slowly inching towards the Federal Reserve’s 2% target. Excluding the ever-volatile food and energy components, the core CPI rose by 0.2% in July, up from 0.1% in June. Over the past year, the core CPI increased by 3.2%, the smallest year-on-year rise since April 2021. All this supports the case for a September rate cut. This confidence is reflected in falling US bond yields and rising expectations for a rate cut in futures contracts. There’s some debate over whether the Fed will cut rates by 25 or 50 basis points, but a 50-point cut seems unlikely unless the economy heats up or cools down dramatically. For now, Jerome Powell and his team are likely to keep their cards close to their chest. Futures on Wall Street went from red to pale green after the release of the data.

Meanwhile, New Zealand’s central bank cut its rates by 25 basis points overnight (from 5.50% to 5.25%), after considering a 50-point cut. This unexpected consideration sent the kiwi plummeting. New Zealand’s central bank rarely makes global headlines, but it’s seen as a bellwether for regional monetary policies, particularly Australia’s. No offense to the central banks of Vanuatu or Fiji.

In China, one problem replaces another. Recent data showed a contraction in bank lending to the real economy in July, the first time in 19 years. This is bad news for the Chinese economy but fuels speculation about stimulus measures. Same story, different day. In Japan, the Nikkei 225 is hovering near equilibrium. Prime Minister Fumio Kishida, who took office at the end of 2021, announced he will step down next month. His popularity has waned, and his party is mired in scandals. The Hang Seng lost 0.3%. The strong performance of American tech stocks is benefiting South Korea and Taiwan, which are up by about 1%. India (+0.1%) and Australia (+0.3%) are more cautious. European indices are bullish, driven by Wall Street’s strong finish.

Today's economic highlights:

The main indicators on Wednesday include UK inflation figures, France’s second estimate, and Eurozone industrial production in Europe. In the US, July inflation and DOE crude oil inventories will complete the picture. See the full agenda here.

The dollar is worth EUR 0.9076 and GBP 0.7785. The ounce of gold is down to USD 2,473. Oil is slightly down, with North Sea Brent at USD 80.74 a barrel and US light crude WTI at USD 77.14. The yield on 10-year US debt is down to 3.86%. Bitcoin is trading at USD 61,000.

In corporate news:

  • Alphabet - The US Justice Department is considering several options, including dismantling Google, after a judge ruled that the group illegally monopolized the online search market, Bloomberg News reported on Tuesday. The stock lost 1.2% before the opening.
  • Kellanova - Mars is close to reaching an agreement to acquire the group for nearly $30 billion, a source familiar with the matter told Reuters on Tuesday. Mars will pay $83.50 per share in an all-cash transaction expected to be announced on Wednesday. At the close on Tuesday, Kellanova's share price stood at 74.5 dollars. The stock gained 8.1% before the opening.
  • Intel sold its 1.18 million shareholding in British chip designer Arm Holdings, according to regulatory documents.
  • Southwest Airlines - Elliott Investment Management is seeking to replace 10 of the 15 members of the airline's board of directors, as the activist investor wants to replace the group's CEO in order to improve its stock market performance. The stock gained 1.3% in pre-market trading.
  • General Motors - Texas Attorney General Ken Paxton accuses the group of selling private driver data to several companies, including insurers, without their consent, and has filed a lawsuit against General Motors.
  • Cardinal Health - On Wednesday, the pharmaceuticals distributor raised its earnings-per-share target to $7.55-7.70 from at least $7.50 previously. The share price rose by 5.4% before trading.
  • Grail said on Tuesday it had cut around 350 jobs and was concentrating on the development of Galleri, its flagship cancer detection test.
  • Allstate - Meiji Yasuda Life Insurance is to acquire American Heritage Life Insurance, a division of the US insurance company, for around $2 billion, the Nikkei reported on Wednesday.

Analyst recommendations:

  • Ball Corporation: Baird upgrades to outperform from neutral with a target price of USD 70.
  • Emerson Electric Co.: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 132 to USD 115.
  • Eqt Corporation: Wells Fargo upgrades to overweight from equalweight with a price target raised from USD 40 to USD 42.
  • Intuit Inc.: Morgan Stanley downgrades to equalwt from overwt with a price target reduced from USD 750 to USD 685.
  • Johnson Controls International Plc: RBC Capital upgrades to sector perform from underperform with a price target raised from USD 61 to USD 69.
  • Medtronic Plc: Stifel downgrades to hold from buy and reduces the target price from USD 100 to USD 85.
  • Monolithic Power Systems, Inc.: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
  • Monster Beverage Corporation: Zacks downgrades to underperform from neutral with a price target reduced from USD 53 to USD 39.
  • Pultegroup, Inc.: Wolfe Research downgrades to peerperform from outperform.
  • Qualcomm, Inc.: President Capital Management Corp upgrades to buy from neutral with a price target raised from USD 184 to USD 208.
  • Starbucks Corporation: Stifel upgrades to buy from hold with a price target raised from USD 80 to USD 110.
  • Coherent Corp.: Barclays maintains its overweight recommendation and raises the target price from USD 66 to USD 85.
  • Crowdstrike Holdings, Inc.: D.A. Davidson maintains its buy recommendation and reduces the target price from USD 380 to USD 290.
  • Lyft, Inc.: Roth Capital maintains its neutral recommendation with a price target reduced from USD 19 to USD 13.
  • Monster Beverage Corporation: Zacks downgrades to underperform from neutral with a price target reduced from USD 53 to USD 39 again.
  • Solaredge Technologies, Inc.: Makor Capital Ltd maintains its hold recommendation and reduces the target price from 65 to USD 34.
  • Vornado Realty Trust: Barclays maintains its underweight recommendation and raises the target price from USD 21 to USD 27.
  • Warner Bros. Discovery, Inc.: Citigroup maintains its buy recommendation and reduces the target price from USD 14 to USD 11.
  • Domino's Pizza Group Plc: Investec upgrades to buy from hold with a target price raised from GBX 355 to GBX 383.