Investors welcomed strong earnings from Bank of America and Bank of New York Mellon, which were released just before the bell. Both banks managed to top expectations, which boosted investors morale.. Several big U.S. banks posted mixed results last week and said they feared the impact of a recession. Meanwhile, Goldman Sachs is set to post its results on Tuesday.

Investors are still looking for the magic formula that will bring a floor back under indexes. The tightening of credit conditions continues to weigh on growth stocks, i.e. companies that sell a lot but earn nothing. The naughty ones would say "will never earn anything". When money was flowing, it didn't matter much. Now that there is less money, it is more complicated. In recent years, many investors sincerely believed they had invested their savings in innovative companies. But they had actually invested in low interest rates, to use an image used by Morgan Housel. With rates rising, the bet becomes disastrous.

In the UK, Prime Minister Liz Truss has been caught between a rock and a hard place since her disastrous first steps in Downing Street. Will she make it through the week? That's the question on the minds of the British press. Its new finance minister, Jeremy Hunt, has approached the governor of the Bank of England in order to get off to a better start. He is expected to announce a fiscal program today that looks less fanciful than that of his short-lived predecessor.

On the macroeconomic front, the week will be marked by the announcement of the first estimate of China's Q3 GDP growth (Tuesday) and by the latest British inflation figures (Wednesday). Not to mention the various and (un)varied interventions of central bankers on monetary policy, Elon Musk's diplomacy and free-thinking classes, the British politico-financial drama and the lessons of the 20th Congress of the Chinese Communist Party, which started yesterday and will end on October 22. Xi Jinping, who is running for a third term, has reaffirmed his desire to make China the world's leading power, while evading the most vexing questions.

The pace of quarterly earnings is accelerating this week with Johnson & Johnson, Roche, Netflix, Tesla, Nestlé, ASML, International Business Machines and L'Oréal among the biggest players. To give you a sense of scale, the calendar has 59 companies from the US S&P500 index.

 

Economic highlights of the day:

The U.S. Empire Manufacturing Index for October (monthly survey of business conditions of about 200 manufacturers in New York State) is today’s main indicator. All the macro agenda here. 

The dollar is down to EUR 1.0229 and GBP 0.8816. The ounce of gold is trading at USD 1664. Oil has erased some of its recent gains, with North Sea Brent crude at USD 92.61 per barrel and U.S. light crude WTI at USD 86.58. The yield on 10-year U.S. debt is back up to the 4% mark. Bitcoin remains near USD 19,500 per unit.

 

In corporate news:

* Goldman Sachs is expected to announce on Tuesday, along with its quarterly results, a reorganization into three major divisions, including the merger of its investment banking and brokerage activities on the one hand, and retail banking and wealth management on the other, a source close to the matter said, confirming information from The Wall Street Journal.

* Apple has frozen plans to use memory chips from China's Yangtze Memory Technologies Co (YMTC) in its products after Washington imposed new export restrictions on Chinese high-tech companies, the Nikkei reported Monday.

* Broadcom will ask the European Commission to validate its plan to buy cloud specialist VMWARE for $61 billion, announced in May, without going through an in-depth investigation, citing competition from Amazon, Microsoft and Google, several sources close to the case said.

* News Corp, Fox - Rupert Murdoch is considering a reunification of News Corp and Fox, the two groups announced Friday. The merger, a decade after the television and movie businesses were split, would strengthen his family's control while cutting costs.

* Splunk - The activist fund Starboard Value holds nearly 5% of the capital of the software publisher and it intends to ask him to take measures to improve its stock market valuation, a source close to the file said. The share gained 4.5% in pre-trade.

 

Analyst recommendations:

Avient Corp: Deutsche Bank initiated coverage with a recommendation of buy. PT up 27% to $40.

Intertek: Jefferies remains "Hold" with a price target reduced from GBp 4,700 to GBp 4,200.

Lloyds Banking Group: Morgan Stanley moves from Overweight to Equal-Weight with a GBp 58 target.

PPG Industries: KeyBanc Capital Markets initiated coverage with a recommendation of overweight. PT up 15% to $127.

Radian: Keefe, Bruyette & Woods upgrades to outperform from market perform. PT up 33% to $25.

Standard Chartered: Morgan Stanley moves from Equal-Weight to overweight targeting GBp 797.

Superdry: Jefferies remains Hold with a reduced target of GBp 250 to GBp 125.

The Clorox Co: Morgan Stanley upgrades to equal-weight from underweight. PT down 1% to $130.