Headline inflation is expected to gain 8.1% year-on-year in August, according to the Reuters consensus, vs. 8.5% in July.

Core CPI is forecast to rise to 6.1%, up from 5.9% in the previous month. If inflation cools more than expected, this might mean that the Fed will "only" hike rates by 0.5% later this month, instead of the now standard 0.75% increase. Currently, traders see a 90% chance that the Fed will opt for an extra 75 bps.

In any case, any easing signal on prices would be welcomed because it would reduce the length of the monetary tightening cycle. Rate hikes are seen as punitive because they reduce the amount of liquidity in circulation and make money more expensive, leading to powerful macroeconomic shocks that cause instability. Investors are able to cope with a gloomy economic environment, but much less so with a future that is difficult to predict.

Equity markets recorded their first weekly gain since mid-August last week. Technology stocks and the most cyclical sectors were at the forefront, followed by financial stocks, still buoyed by the prospect of rate hikes. The most defensive stocks and the energy sector were at the back of the pack. The continued decline in oil prices supported this movement. In recent weeks, equity markets reacted positively to declines in black gold, because high energy prices are inflationary.

US inflation figures will not be the only highlight of the week. Chinese President Xi Jinping is scheduled to make his first foray abroad since the coronavirus outbreak. And who is he planning to visit? Not world leader Biden, not petulant Truss, not jovial Scholz, but Vladimir Putin of course. Coincidence? Obviously not. The two leaders, while not having perfectly convergent strategies, have at least 4250 km of common borders and identical enemies, which is usually enough to create a community of interests. The meeting will take place in the middle of the week in Samarkand, Uzbekistan.

This comes as Washington's hardening stance on semiconductor exports to China is confirmed. KLA, Lam Research and Applied Materials, Nvidia or Advanced Micro Devices have received letters telling them to stop selling certain chips.

 

Economic highlights of the day:

No major indicators on the agenda today. All the macro agenda here.

The dollar is down to EUR 0.9863. Gold lost a few cents to USD 1728. Oil is up, with North Sea Brent at USD 94.51 per barrel and US WTI light crude at USD 88.30. The yield on 10-year U.S. debt is at 3.32%. Bitcoin rebounded on Friday and is trading around USD 22,357.

 

On markets:

* Bristol-Myers Squibb is up 6.9% in pre-market trading after the U.S. Food and Drug Administration (FDA) approved its oral treatment for plaque psoriasis in adults.

* Johnson & Johnson reached a settlement of AUD 300 million to settle two class action lawsuits in Australia involving defective implants.

* Walt Disney - Activist investor Daniel Loeb has dropped his call for a spinoff of ESPN, saying he now "better understands" the growth potential of the sports network.

* Twitter - In a letter to Twitter's board of directors Friday, Elon Musk said the social network's decision to pay several million dollars to a whistleblower it fired is another reason to abandon its takeover plans. Twitter stock is down 1% in pre-market trading.

* Amazon plans to spend $15 billion (14.77 billion euros) this year on content for its video streaming platform, including sports broadcasts, compared with a total of $13.6 billion for Netflix, Bloomberg reports.

* The Boeing Company - Air India, owned by Indian conglomerate Tata Group, announced plans Monday to lease 30 Boeing and Airbus aircraft, increasing its fleet by more than 25%.

 

Analyst recommendations:

  • Adobe: Mizuho Securities downgrades to neutral from buy. PT up 11% to $440.
  • Barratt: Berenberg downgrades from buy to hold targeting GBp 459.
  • Bellway: Berenberg downgrades from buy to hold, targeting GBp 2300.
  • Crest Nicholson: Berenberg downgrades from buy to hold, targeting GBp 250.
  • Halma: Jefferies remains Underperform with a price target reduced from GBp 1960 to GBp 1820.
  • MJ Gleeson: Berenberg remains Buy with a price target reduced from GBp 950 to GBp 680.
  • Next: Citigroup starts the follow up to sell targeting GBp 5100.
  • Persimmon: Berenberg downgrades from buy to hold, targeting GBp 1700.
  • Redrow: Berenberg downgrades from buy to hold, targeting GBp 510.
  • Tate & Lyle: Jefferies downgrades from buy to hold targeting GBp 780.
  • Taylor Wimpey: Berenberg downgrades from buy to hold, targeting GBp 122.
  • The Berkeley Group: Berenberg upgrades from hold to buy targeting GBp 4500.
  • The Gym Group: Jefferies remains Buy with a price target reduced from GBp 330 to GBp 290.
  • Vistry: Berenberg downgrades from buy to hold, targeting GBp 840.