Microsoft and China: a constant maintenance of the fire

The awakening of Western markets is focused on two main factors. On one hand, it is the performance results of companies, particularly Microsoft and Alphabet. On the other hand, it is a series of economic measures announced by China. Let's take a closer look at these two topics after reviewing the previous session.

Yesterday, all Western indices experienced a taste of recovery.

Except for the Spanish index IBEX, which fell by 0.2%. This left my colleague Eduardo silent, as he tirelessly tries to prove that the Madrid stock exchange outperforms all others. IBEX couldn't withstand the poor performance of its banking sector and found itself at the forefront of an unfavorable streak of five consecutive sessions in the red. In other cases, the trend was mostly positive, with increases ranging from 0% to 1%, particularly thanks to the absence of escalation in the Middle East at this time. This pleasant decline was evident in the oil market, which corrected downward quite significantly. The leader was the Nasdaq exchange, with an increase of nearly 1%.

Investors show a high level of trust in the results of leading players in the digital technology sector, which allows me to smoothly transition to the results announced by Microsoft and Alphabet yesterday after the market closed on Wall Street.

I'm making an immediate conclusion without unnecessary delays: the creator of the clumsy but essential operating system Windows gained 4% after announcing the figures, while the owner of the clumsy but essential search engine Google lost 6%. However, they share one thing in common: they both exceeded expectations in their results. But Microsoft is doing this through artificial intelligence and cloud technologies, while Alphabet shows strength in advertising but is weak in cloud technologies and remains silent on artificial intelligence. The market has concluded that thanks to early initiatives taken in OpenAI, Bill Gates' baby is always ahead of the competition. Common sense suggests that if you're launching a company in 2023, don't forget to mention "artificial intelligence" in the description, even if your use of AI boils down to asking ChatGPT to create a footer for your website. Microsoft's strong results should overshadow Alphabet's failure because they support the prevailing narrative about the prospects of AI.

Since this is about quarterly earnings reports, many announcements are expected today, including in Europe with several significant signings.

I continue to observe a certain polarization in results: on one hand, there are companies that continue to push high prices onto consumers, effectively masking the slowdown in activity; on the other hand, there are companies that either warn about or struggle to justify the expectations placed on them. For instance, Michelin, Beiersdorf, and Dassault Systèmes have raised their forecasts, while Worldline and OVH have done the opposite, and Kering continues to decline. Boeing, Meta, and IBM will complete the picture in the United States later today.

Another important event is the awakening of Chinese stocks following a series of measures to support the economy.

It cannot be said that there has been an explosive increase, as the initial gains on the stock market have significantly decreased. At the time of writing this article, the Hang Seng index has risen by 1.4%. Overall, Beijing has significantly eased the allowable deficit for financing the economy, which will allow for an increase in government debt by the end of the year. Experienced experts note that China rarely changes budgetary rules during the year, indicating that the Communist Party has decided to send a strong signal. In parallel, Hong Kong announced a reduction in property taxes and a decrease in transaction fees in hopes of reviving two neglected sectors of its economy. In compensation for all this, the promoter Country Garden officially defaulted on a dollar bond, as was reported shortly before 8 AM.

Thus, today the markets will react to company results, except for major events in the Middle East. The German Ifo index and data on new home sales in the United States will provide some macroeconomic information.

Important economic events today:

• Ifo Business Climate Index in Germany (10:00)
• Data on new housing in the USA in September (16:00)
• U.S. oil inventory week (16:30)

The euro has returned to 1.0602 US dollars. Gold remains stable at 1,973 US dollars per ounce. Oil prices have decreased, with North Sea Brent at 87.10 US dollars per barrel and American light crude WTI at 83.64 US dollars. The yield on 10-year US bonds remains stable at 4.84%. Bitcoin has dropped to 34,060 US dollars.

Main changes in the recommendations:

• Bawag: Keefe Bruyette & Woods reaffirms its "outperform" rating with an increase in the target price from €90.15 to €90.63.
• Believe: JP Morgan confirms a neutral recommendation with an increase in the target price from 11.30 euros to 11.50 euros.
• BNP Paribas: Barclays reaffirms its "overweight" rating and lowers the target price from 83 euros to 80 euros.
• Bonduelle: BNP Paribas Exane confirms a neutral recommendation with a target price reduction from 13 euros to 12 euros.
• Delivery Hero: Morgan Stanley reaffirms its "overweight" rating and lowers the target price from 45 euros to 44 euros.
• DSV: ABG Sundal Collier reaffirms its "buy" recommendation and lowers the target price from 1250 Danish kroner to 1170 Danish kroner. HSBC changes its recommendation from "reduce" to "hold" with a target price of 1150 Danish kroner.
• EDP Renovaveis: Morgan Stanley reaffirms its "overweight" rating and lowers the target price from 21 euros to 19 euros.
• Enagas: Goldman Sachs reaffirms its "sell" recommendation, lowering the target price from €15.50 to €14.50.
• Eurofins: AlphaValue/Baader Europe reaffirms its "buy" recommendation, lowering the target price from 83 euros to 82 euros. Oddo BHF maintains a neutral recommendation, reducing the target price from 70 to 55 euros.
• Getinge: Morningstar changes its recommendation from "hold" to "buy," raising the target price from 221 Swedish kronor to 247 Swedish kronor.
• Hermès: CICC reaffirms its "outperform" rating and lowers the target price from €2180 to €2000. Citi maintains a neutral rating, reducing the target price from €1845 to €1830. Goldman Sachs reaffirms its "sell" rating and raises the target price from €1480 to €1514. ING Groep: Redburn Atlantic reaffirms its "buy" rating, increasing the target price from €16.16 to €16.162.
• JCDecaux: Société Générale reaffirms its "hold" recommendation with a target price reduction from €18.50 to €17.50.
• Kering: JP Morgan confirms a neutral recommendation with a target price reduction from 575 euros to 475 euros. Morgan Stanley reaffirms its "overweight" recommendation with a target price decrease from 480 euros to 435 euros. RBC Capital maintains its "outperform" recommendation and lowers the target price from 555 euros to 540 euros. Mediobanca confirms a neutral recommendation with a target price reduction from 680 euros to 510 euros.
• Logitech: AlphaValue/Baader Europe confirms a "reduce" recommendation with an increase in the target price from 62.30 Swiss francs to 65.30 Swiss francs. Bank Vontobel AG confirms a "buy" recommendation with an increase in the target price from 71 Swiss francs to 77 Swiss francs. Goldman Sachs confirms a "buy" recommendation with an increase in the target price from 69 Swiss francs to 75 Swiss francs.
• Lonza: Berenberg reaffirms its "buy" recommendation and lowers the target price from 570 Swiss francs to 390 Swiss francs.
• Michelin: Goldman Sachs reaffirms "buy" recommendation and lowers target price from 35