Remember the word of the week: "skip." It's the word of choice for the American central bank, and it should be taken literally. Financiers believe that the Fed will skip a rate hike on June 14 at the conclusion of its monetary policy meeting. The probability of this scenario is around 75% based on rate futures, compared to 25% for a quarter-point rate hike. Such a decision would signal that the central bank is nearing the peak of its cycle. Investors are eagerly anticipating this moment as it brings them closer to a more favorable monetary policy, where money will become cheaper again. This is reassuring for risk-taking and often more rewarding in the stock market.
The Fed's decision is the highlight of the week. However, we must also consider a potentially disruptive element on Tuesday when the US statistical office releases its May inflation figures. The prevailing scenario suggests continued moderation, but an upward slide could create tension in the market and lead to revisions in probability. Conversely, if price overheating were to slow more sharply than expected, the June skipping would be confirmed, and speculation about the Fed's intentions in July would resume.
The ECB is also in focus this week, on June 15. Christine Lagarde and her team are expected to tighten the screws by a quarter point. Economists generally anticipate that European rates will peak at the end of next month, following two hikes in June and July. However, it remains to be seen whether this theory will withstand the uncertainties of early summer. The Bank of Japan will also update its monetary policy on Thursday night.
Equity markets ended the previous week higher in the US and lower in Europe. The S&P500 closed its fourth consecutive week in the green, officially entering a bull market after recovering more than 20% in just a few months. Theoretically, a bull market calls for further upside. Statistically, hedge funds have never had so many open positions against the S&P500 since 2007. In the Financial Times, Robert Armstrong wrote on Friday that interpreting this situation is not as easy as it may seem: after all, put options are used to speculate on the downside but also to hedge positions that are still in the portfolio. Investors' European bias seems to have vanished, as they now favor the USA (and Japan) once again.


Economic highlights of the day:

There are no major releases on the Western markets today. Japan announced earlier this morning that its producer prices rose by 5.1% year-on-year, which is high but below expectations (5.6%). Full agenda here.

The dollar is trading at EUR 0.9278 and GBP 0.7947. The ounce of gold remains stable at USD 1965. Oil is recovering from its contraction, with North Sea Brent at USD 73.17 a barrel and US light crude WTI at USD 68.57. The yield on 10-year US debt is little changed at 3.67%. Bitcoin is trading at USD 26,000. 


In corporate news:

  • Illumina - The CEO of genetic sequencing machine maker, Francis deSouza, resigned on Sunday, handing a victory to activist investor Carl Icahn and reinforcing expectations that the controversial Grail acquisition would be canceled in 2021.
  • VMware, Broadcom - The European Commission is set to approve, subject to conditions, the proposed $61 billion acquisition of cloud computing company VMware by US chipmaker Broadcom.
  • Microsoft - Sam Altman, CEO of Microsoft-backed startup OpenAI and owner of ChatGPT, said Monday that his recent world tour had made him "quite optimistic" about the prospects for global coordination in the field of artificial intelligence (AI).
  • Chinook Therapeutics is up in pre-market trading after Swiss drugmaker Novartis said that it had agreed to acquire it for up to $3.5 billion.
  • Google - Twitter refused to pay its bills to Google Cloud when its contract with the two groups is up for renewal in June, potentially crippling the social network's trust and security teams.
  • Trinet Group - The online payroll services provider is considering a sale of the company and is working with investment bank Morgan Stanley to make contact with potential buyers.
  • American Airlines and JetBlue Airways asked a U.S. judge on Friday to allow them to continue their mutual frequent flyer recognition and codeshare agreements after Judge Leo Sorokin ruled on May 19 that the two airlines must terminate their NEA alliance, which covers air routes in the northeastern U.S.


Analyst recommendations:

  • Amazon: Phillip Securities downgrades to neutral from accumulate. PT set to $120
  • Ameren: KeyBanc Capital Markets raised to overweight from sector weight. Price target upgrades 8% to $90.
  • Ameriprise Financial: Keefe, Bruyette & Woods maintains its price target to $350.
  • CenterPoint Energy: Guggenheim Securities raised the recommendation to buy from neutral. PT up 11% to $32.
  • DocuSign: Wedbush maintains its neutral opinion on the case. PT adjusted from $60 to $67.
  • Moderna: Jefferies maintains its opinion on the stock. Price target set to $275.
  • Netflix: Phillip Securities  cut the recommendation to neutral from accumulate. PT down 7.6% to $388
  • Old Dominion Freight Line: Jefferies initiated coverage with a recommendation of hold. PT increases 14% to $350.
  • Oracle: Wolfe Research raised the recommendation to outperform from peerperform. Price target up 18% set to $130.
  • PagSeguro Digital: JPMorgan Chase maintains its recommendation. PT up to $11.50 from $10