The third week of July was a messy one. While the cards have been reshuffled for the American presidential election, it's been a worldwide computer quagmire. China returned to the center of the game, for better or for worse, and the avalanche of mid-year corporate results got underway. Many stock market indices lost 2% or more in five sessions. The main exception to the rule is the Dow Jones, which can look back on a positive weekly performance, thanks to its overexposure to defensive sectors (healthcare, consumer staples, energy).

Everyone is now convinced that the US central bank will cut rates in September, the prospect of a second term for the man with the pierced ear doesn’t frighten financiers at all, and corporate earnings look promising in the US, but worrying in Europe, which saw 25 warnings in ten days.

The White House leaked that the rules would be tightened further to prevent Beijing from gaining access to the most advanced chips. Not to be outdone, Donald Trump's entourage reiterated that he was prepared to further raise tariffs on Chinese products. And many of the European companies I mentioned earlier warned that their torment stemmed in particular from Chinese consumers, who no longer have the same means as before.

In addition to China, tech also struggled. This is partly due to China, with fewer outlets for semiconductors, but also because of the profit-taking effect after another crazy first half for the tech giants. In addition, investors' appetite grew for bargain smaller stocks, which are expected to benefit fully from the Fed's rate-cutting effect. So, we have a bit of a volume problem, since technology weighs far more than any other sector in the United States. So, when Chuck sells (a little) technology to buy utilities, small industries and real estate, it's like creating a seller's flow on giants and a buyer's flow on much smaller companies. This has mechanically made Wall Street go red.

In addition, the cybersecurity giant CrowdStrike crashed an update in style. The problem is that the company has posted bits and pieces of its solutions all over the digital universe. This blunder, which is already one of the biggest computer disasters in history, has disrupted or brought to a halt the activities of transport, banking and media companies across the globe.

Comments are going back and forth on the impact of Joe Biden's withdrawal on the financial markets. Here are a few professional opinions. The initial reactions aren't very violent, but that doesn't mean that this complexification of the American political landscape won't lead to more profound movements in the days ahead. In reality, nobody knows for sure. Kamala Harris, endorsed by many donors, Biden and the Clintons, is favorite, but has yet to be officially nominated by her camp.

In China, the authorities yesterday published a policy document that favors the tech sector and increases pressure on banks to support communities. The plan was judged too general by the financial markets, which did not detect any particular inflexion. However, China's central bank, the PBOC, unexpectedly cut two of its key rates by 10 basis points this morning. economists see this as an acknowledgement of the country's economic difficulties.

Investors are also preparing for a busy week of economic data and corporate earnings. Key reports include the preliminary PMI index, Q2 GDP growth, and the PCE price index. Major companies like Alphabet, Coca-Cola, Visa, IBM, Lockheed Martin, AT&T, and Tesla are set to release their quarterly results. LVMH, TotalEnergies, Nestlé and SAP will do so in Europe. There will be some 450 earnings reports from companies with market capitalizations of over $5 billion on Western markets over the next five sessions.

In Asia Pacific this morning, markets were rather gloomy, with the exception of the Hang Seng, which recovered 1% against the tide of other tech-rich indices. The PBOC's boost is a factor, even though mainland China is down. South Korea lost around 1%, still weighed down by the downturn in the semiconductor sector, which was also very visible in Taiwan (-3%), where TSMC led the stock market into the red. European indices are in the green.

Today’s economic highlights:

The Chicago Fed's national activity index is today’s main indicator. The full agenda is here. 

The dollar is slightly up to EUR 0.9194 and GBP 0.7742. Gold is down to USD 2397. Oil retreats, with North Sea Brent at USD 81.91 a barrel and US light crude WTI at USD 77.86. The yield on 10-year US debt reaches 4.21%. L bitcoin trades at USD 67,600.

In corporate news:

  • Verizon Communications announced an increase in cell phone subscribers that exceeded expectations in the second quarter, thanks to strong demand for its video streaming bundles from Netflix and Walt Disney's Disney+, although shares are down 2.3% in premarket trading due to lower-than-expected quarterly sales.
  • Nvidia is developing an AI chip version that complies with U.S. criteria for export to China, with shares up 1.3% before the opening.
  • Boeing raised its 20-year aircraft delivery forecast by 3% to 43,975 aircraft, reported improvements in 737 MAX production, expects to return to normal levels by year-end, and announced a supply agreement with the U.S. Air Force for E-7 Wedgetail aircraft, while Korean Air plans to order around 20 Boeing 777X aircraft.
  • CrowdStrike continues its decline from Friday after a global computer outage, with a 3% drop before the opening.
  • Bank of America saw Berkshire Hathaway sell approximately 34 million shares, resulting in a 1.4% stock decrease before the opening.

Analyst recommendations:

  • 10X Genomics, Inc.: Jefferies upgrades to buy with a target price of USD 24.
  • American Airlines Group Inc.: Bernstein downgrades to market perform with a price target reduced from USD 18 to USD 12.
  • Comerica Incorporated: Truist Securities downgrades to hold with a target price reduced from USD 55 to USD 53.
  • Consolidated Edison, Inc.: Barclays downgrades to underweight with a target price reduced from USD 97 to USD 92.
  • CrowdStrike Holdings, Inc.: President Capital Management Corp downgrades to neutral with a target price reduced from USD 420 to USD 320, and Guggenheim also downgrades to neutral.
  • Eastgroup Properties, Inc.: Wedbush upgrades to outperform with a target price raised from USD 162 to USD 208.
  • Estee Lauder: Raymond James downgrades to market perform.
  • Fidelity National Information Services, Inc.: Morgan Stanley downgrades to equal weight with a target price of USD 79.
  • Fiserv, Inc.: Morgan Stanley upgrades to overweight with a target price raised from USD 154 to USD 175.
  • Henry Schein, Inc.: Baird upgrades to outperform with a target price raised from USD 81 to USD 92.
  • International Flavors & Fragrances Inc.: Stifel upgrades to buy with a target price raised from USD 95 to USD 115.
  • Lennar Corp-B and Lennar Corporation: Goldman Sachs downgrades to neutral with a target price reduced from USD 180 to USD 174.
  • Portland General Electric Company: KeyBanc Capital Markets upgrades to overweight with a target price of USD 52.
  • Selective Insurance Group, Inc.: Keefe Bruyette & Woods upgrades to outperform with a target price reduced from USD 104 to USD 99.
  • Stag Industrial, Inc.: Wedbush upgrades to outperform with a target price raised from USD 38 to USD 44.
  • The Interpublic Group of Companies, Inc.: Morgan Stanley downgrades to underweight with a target price reduced from USD 34 to USD 28.
  • Toast, Inc.: William O'Neil & Co Incorporated upgrades to buy.
  • Bill Holdings, Inc.: Oppenheimer maintains its outperform rating and reduces the target price from USD 95 to USD 70.
  • Lyft, Inc.: Jefferies maintains a hold recommendation with a target price reduced from USD 17.50 to USD 13.50.
  • Nvidia Corporation: Piper Sandler & Co maintains its overweight recommendation and reduces the target price from USD 1200 to USD 140.
  • Sunrun Inc.: Piper Sandler & Co maintains its overweight recommendation and raises the target price from USD 15 to USD 20.
  • Teradyne Inc.: Morgan Stanley maintains its market weight recommendation and raises the target price from USD 116 to USD 145.
  • Western Alliance Bancorporation: Citigroup maintains its buy recommendation with a target price raised from USD 79 to USD 98.
  • Antofagasta Plc: Peel Hunt downgrades to reduce with a target price raised from GBX 1695 to GBX 1715.
  • Rentokil Initial Plc: Bernstein upgrades to market perform with a target price of GBX 510.
  • Rio Tinto Plc: AlphaValue/Baader Europe upgrades to buy with a target price reduced from 69.18 to GBP 66.19.
  • Travis Perkins Plc: JP Morgan upgrades to overweight with a target price raised from GBP 6.10 to GBP 11.