Weekly market update : Accumulating on these levels becomes rational

After long weeks full of gloom, investors have finally regained their appetite for risk. The proof is in the pudding, as the US indexes have broken out of their downward spiral by posting a weekly gain, the first after several consecutive weeks of decline. The Federal Reserve is no stranger to this buying spree, particularly with the release of the Fed's latest "minutes", which suggest that the institution could show more restraint in tightening its policy to avoid a severe recession.

Weekly variations* US 500 4158  +6.58% DOLLAR TREE, INC. +29.03% ULTA BEAUTY, INC. +23.91% DOLLAR GENERAL CORPO... +21.74% MOLINA HEALTHCARE, I... -1.44% MEDTRONIC PLC -3.36% DEXCOM, INC. -10.01% DJ INDUSTRIAL 33212.96  +6.24% NASDAQ 100 12681.42  +7.15% FTSE 100 7585.46  +2.65% GOLD 1853.55$  +0.40% WTI 115.13$  +4.38% EURO / US DOLLAR 1.07$  +1.54%

This week's gainers and losers

Tops / Flops Up: VMWare (+30%): Broadcom will buy the company at $142.50 a share, a bill of about $61B (plus $8B in debt). The friendly takeover will strengthen the San Jose-based group's solutions portfolio. Dollar General (+18%): As much as Walmart and Target's forecasts disappointed the previous week, the low-cost retailer's forecasts were very attractive.  Dollar Tree (26%) Just like Dollar General, Dollar Tree gains this week as consumers with lower purchasing power tend to shift their purchases to the low-cost segment. Zoom Videos Communications (+20%) The tech company rose after posting better than expected revenues and strong guidance. Down: Snap (-33%): The big drop of the week. The social network, which is still not profitable, warned that its targets will not be met, the fault of an advertising market that is slowing down. The publication briefly sunk US technology stocks again at the beginning of the week. SSE (-9%) The share price of the British group dropped due to a windfall tax on electricity generators.

Commodities

Oil: Oil prices continue to rise, supported by a tightening gasoline market in the U.S., whose inventories fell again this week. The buying appetite remains intact, despite efforts by the US to release oil from its strategic reserves. In terms of prices, Brent crude is trading near USD 117 per barrel while the US benchmark, WTI, is trading around USD 113. Metals: The base metals segment is still on hold, weighed down by growing fears of a global economic slowdown. As evidence of this, copper is approaching USD 9,000 per metric ton, its lowest level of the year. Nickel, aluminum and tin have also been on a similar path and have declined overall over the past five days. In precious metals, gold recorded a buying impulse, taking its price up to USD 1,870, a rebound that was however hampered at the end of the week by the sudden return of risk appetite with the advance of the stock market indices. Agricultural products: Grain prices declined overall in Chicago, with traders keeping a close eye on protectionist measures by exporting countries, which tend to multiply given supply concerns and inflationary pressures. Wheat is trading at 1150 cents a bushel, compared to 765 cents for corn.

Macroeconomics

Atmosphere: Rate hikes have been integrated by investors, who seem to be more comfortable with central banks' strategies. The economic statistics are still less favorable than expected. These are still small signals, but they should be watched: when a number sporadically misses the consensus, it's an accident. When below-expectation data starts to multiply, it's a trend. Note that the Chinese government is still blowing hot and cold on its stimulus efforts. There are still many bottlenecks for international trade. Rates: U.S. Treasury yields have clearly been down in recent days, with the 10-year maturity paying 2.73%, ten points lower than the previous week, which was itself ten points lower than the previous week. Translation: investors have a good idea of what the Fed will do in the coming months and do not think it will go beyond its announced efforts to curb inflation. In Europe, yields did not experience the same correction over the week, probably because the ECB confirmed that it is considering raising rates in the coming weeks. The Bund is at 0.94% on 10 years and the French OAT at 1.46%. Swiss bonds are still the cheapest at 0.69%. Currencies: Expectations of a Fed rate hike appear to be a bit more focused, which has reduced the strength of the greenback. The dollar index, which measures the strength of the U.S. currency against a basket of currencies, has fallen from 104.75 points mid-month to 101.75 points currently. The ECB's more aggressive stance on policy rates is also helping to push the euro back above $1.07. The greenback has also retreated against the Australian dollar and even the British pound, despite a UK economy facing difficulties. Cryptocurrencies: The week is not ending positively for bitcoin, which is hovering around $29,000 at the time of writing. After signing an eighth consecutive week of declines, the digital currency could well close a ninth if it fails to regain the $30,300 mark soon. Unprecedented successive weekly declines that may not be over yet in this macroeconomic context where it is difficult to detect real bullish catalysts for risky assets. Calendar: The week will start with a holiday in the United States (Memorial Day). It will not be the only one as China will be affected on June 2 and the UK will lower the curtain on Thursday 2 and Friday 3 June 2022. The big weekly statistic will be on Friday with the US employment figures for May.

Accumulating on these levels becomes rational This week was more positive than the previous one, when fear hit a new high. Much of the bad news now seems to be priced in. The less favorable monetary policy of central banks since the beginning of the year and the expectations of disappointing results in the second quarter are proving to be integrated in the prices. Only a more lasting recession could take the market down another notch. But let's not be too pessimistic. The main pockets of overvaluation have deflated and the market has returned to its historical average valuation. This is enough to accumulate on interesting levels and find good opportunities on markets.

Things to read this week

Zoom Video Communications, Inc.: An attempt to reconnect The Californian company founded by Eric Yuan in San Jose in 2011 has emerged as the big winner of this epidemic by establishing itself in the market of video... Read more Netflix: A stock that remains highly speculative In the space of six months, the streaming giant's stock market valuation has been divided by 4, seducing today many investors who see it as an ideal entry... Read more Despite the outrage, Terra might not be done just yet Unlike Lehman Brothers, however, it appears there is still activity associated with Terra: the community refines revival plans, developers of Terra-based DApps... Read more

*The weekly movements of indexes and stocks displayed on the dashboard are related to the period ranging from the open on Monday to the sending time of this newsletter on Friday. The weekly movements of commodities, precious metals and currencies displayed on the dashboard are related to a 7-day rolling period from Friday to Friday, until the sending time of this newsletter. These assets continue to quote on weekends.