Friday's rebound in Western equity markets lifted spirits after a challenging start to the week. The slump in big tech stocks appears to have ended, but it's too soon to declare victory. Meanwhile, quarterly earnings reports roll on, and three major central banks are stepping into the spotlight.

Monetary policy might seem straightforward on paper: central banks adjust key rates to foster economic stability. Lower rates stimulate a sluggish economy, while higher rates prevent overheating. In reality, the process is far more complex, influenced by both domestic and international factors. Central banks often operate out of sync, adding another layer of complexity. This week, we’ll see a prime example of this with the Bank of Japan (BOJ), the U.S. Federal Reserve (Fed), and the Bank of England (BOE) each taking different paths.

The BOJ, which announces its decision early Wednesday, is expected to raise rates by 0.10 points. This would be the second increase since March, as Japan finally sees some inflation. However, only a slim majority of economists predict this move, so it's far from certain. The Fed, on the other hand, is likely to hold rates steady while hinting at a possible rate cut in September. Recent PCE inflation data supports this scenario. Futures markets are even pricing in three rate cuts by year-end, though investors often overestimate to ensure they get at least two. With inflation falling and economic activity holding up, the Fed has the luxury of time. This rate-cutting outlook is driving interest in mid-cap and lower-quality stocks at the expense of tech giants. While Japan tightens and the U.S. waits, the BOE is expected to ease. Analysts predict a rate cut from 5.25% to 5% on Thursday, though BOE members are likely to be divided. The UK economy remains weak, justifying a rate cut despite persistent inflation threats. The market anticipates a slow and uncertain easing cycle following this initial move.

Central banks will dominate the week, but corporate earnings will also be in focus. In the U.S., Microsoft, Apple, Meta, and Amazon aim to offset the disappointment from Tesla and Alphabet. In Europe, heavyweights like Heineken, L'Oréal, Airbus, HSBC, Schneider, Shell, and AXA are set to report.  By week's end, 75% of S&P 500 companies will have reported second-quarter results, up from 41% now. It's a crucial week after a sluggish start, with mixed signals: earnings are up, but positive surprises are rare, and sales are struggling.

Both in Europe and the U.S., consumer spending appears to be waning, a growing concern for financial professionals. On the political front, Kamala Harris is closing the gap with Donald Trump, now trailing by just 0 to 2 points in polls. The U.S. presidential race is heating up, though the business community still favors the Republican candidate. In China, a Politburo meeting this week could provide clarity on economic recovery efforts following recent Communist Party announcements. The G20 has pledged to cooperate on taxing the "super-rich," but this remains a commitment rather than a concrete plan.

In Asia-Pacific trading this morning, Tokyo ended an eight-session losing streak with a 2% rebound. Hong Kong and Seoul rose by 1.2%, while Sydney and Bombay also saw gains. Only mainland China lagged, with the CSI300 down 0.35%. European indices are bullish, and U.S. futures are firmly in the green.

Today's economic highlights:

There are no major indicators today.

The dollar is gaining ground and is worth EUR 0.9242 and GBP 0.7790. The ounce of gold is little changed at USD 2390. Oil suffers, with North Sea Brent at USD 79.88 a barrel and US light crude WTI at USD 76.78. The yield on 10-year US debt falls to 4.15%. Bitcoin is trading at USD 69,800.

In corporate news:

  • McDonald's reported an unexpected drop in quarterly sales, with group sales falling by one percent between April and June, marking the first decline in thirteen quarters.
  • Apple's new artificial intelligence features will be deployed later than planned and will not be included in the initial launch of the new iOS 18 and iPadOS 18 operating systems scheduled for September, according to Bloomberg.
  • Nvidia, Alphabet, Amazon, Meta, and Tesla are up between zero point five percent and zero point eight percent in pre-market trading after last week's tech stock downturn.
  • Coinbase, Bitfarms, Riot Platforms, and Cleanspark saw shares increase between three point seven percent to four point five percent in pre-market trading on Monday after Donald Trump promised more favorable regulation for the bitcoin industry.
  • International Game Technology (IGT) and Everi Holdings' digital and gaming businesses are to be acquired by Apollo Funds in an all-cash deal valued at six point three billion dollars, with IGT's shares jumping twenty percent and Everi's climbing forty percent in pre-market trading.
  • Abbott Laboratories was ordered by a court to pay four hundred ninety-five million dollars in damages, and its share price fell by seven point six percent in pre-market trading.
  • Boeing is considering former Rockwell Collins boss Kelly Ortberg as a candidate for its next CEO, according to The Air Current.
  • Walt Disney's Marvel's “Deadpool & Wolverine” grossed two hundred five million dollars in the U.S. and Canada over the weekend, marking its biggest domestic opening so far this year.
  • Walmart is planning to invest two hundred million dollars in autonomous forklifts to further automate warehouse operations, as per Reuters.
  • Vital Energy and Northern Oil and Gas will jointly acquire U.S. shale assets from Point Energy Partners for one point one billion dollars.
  • Starbucks' former CEO Howard Schultz opposes a potential deal between the group and Elliott Investment Management, as reported by the Financial Times.

Analyst recommendations:

  • Akamai Technologies, Inc.: Guggenheim upgrades to buy with a target price of USD 128.
  • Alphabet Inc.: Phillip Securities upgrades to buy with a target price raised from USD 195 to USD 205.
  • Apple Inc.: Aletheia Capital Limited downgrades to hold.
  • AT&T Inc.: Baptista Research downgrades to hold with a target price raised from USD 19.80 to USD 21.80.
  • Booz Allen Hamilton Holding Corporation: Wells Fargo upgrades to overweight with a target price reduced from USD 168 to USD 165.
  • Chipotle Mexican Grill, Inc.: Baptista Research downgrades to hold with a target price reduced from USD 3340 to USD 55.90.
  • Edwards Lifesciences Corporation: Wolfe Research upgrades to peerperform.
  • Fortinet, Inc.: Guggenheim downgrades to neutral.
  • Msci, Inc.: Baptista Research downgrades to hold with a target price raised from USD 566.30 to USD 584.10.
  • Olin Corporation: JP Morgan upgrades to overweight with a target price of USD 55.
  • Sarepta Therapeutics, Inc.: RBC Capital upgrades to outperform with a target price of USD 182.
  • Charles Schwab: Piper Sandler & Co downgrades to neutral with a target price reduced from USD 80 to USD 64.
  • Stellantis N.V.: Deutsche Bank downgrades to hold with a target price reduced from EUR 35 to EUR 23.
  • 3M Company: Jefferies remains at hold with a target price raised from USD 105 to USD 140.
  • IBM: Baptista Research downgrades to underperform with a target price reduced from USD 188.10 to USD 183.20.
  • Cullen/Frost Bankers, Inc.: Truist Securities maintains its hold recommendation with a target price raised from USD 102 to USD 126.
  • Dexcom, Inc.: Mirae Asset Securities maintains its buy recommendation and reduces the target price from USD 159 to USD 100.
  • Mohawk Industries, Inc.: Raymond James maintains its strong buy recommendation and raises the target price from USD 140 to USD 185.
  • Newell Brands Inc.: RBC Capital maintains its sector perform recommendation and raises the target price from USD 7.50 to USD 9.50.
  • Southstate Corporation: Truist Securities maintains its hold recommendation and raises the target price from USD 81 to USD 109.
  • Universal Health Services, Inc.: Leerink Partners maintains its outperform rating and raises the target price from USD 195 to USD 245.
  • Bae Systems Plc: Citi upgrades to buy with a target price raised from GBP 14 to GBP 14.40.
  • Drax Group Plc: Morgan Stanley downgrades to equal weight with a target price raised from GBX 650 to GBX 670.