Monday
March 29
Weekly market update
intro European markets were nervous last week, hampered by new restrictive measures that could slow down the economic recovery on the Old Continent and the slow pace of vaccination campaigns. This is in stark contrast to the improved US economic outlook, which had rekindled inflationary fears and led to a sell-off in the technology sector.
Indexes

In Asia, the Hang Seng and the Nikkei recorded weekly losses of 2.1% while the Shanghai composite gained 0.4%.

In Europe, the CAC40 lost 0.3% over the last five sessions, while the DAX climbed 0.8% and the Footsie 0.3%. For the peripheral countries of the euro zone, Spain lost 0.15%, Portugal 0.3% but Italy gained 0.7%.

Across the Atlantic, performances are close to balance. The Dow Jones is up 0.5% for the week, as is the S&P500 and the Nasdaq-100 is down 0.25%.

Evolution of the Nikkei in monthly data

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Commodities

Oil prices have literally yo-yoed this week, moving either sharply up or down. The Suez Canal blockage is disrupting oil supplies to Europe, prompting some traders to speculate on a rise in the black gold. Despite this volatility, the barrel remains stable.

Volatility is completely absent in gold, which is slowly but surely slipping towards USD 1,700. The gold metal is still shunned by investors, who only swear by the direction of real interest rates on the major bond markets. Silver is trading at USD 24.8.

In base metals, copper continues to breathe at USD 8,700, while aluminum is stabilizing at USD 2,200.

Gradual degradation of gold

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Equities markets

After this week of market consolidation, we take a look at India's Vedanta Limited, which has been one of the best performers on the Sensex 30 since the beginning of the year with a rise of almost 40%. The $11.5 billion group is India's largest producer of non-ferrous metals (aluminum, zinc, copper, etc.).

In a few figures, the Bombay-based company has a 2020 turnover of 830 billion Indian rupees, the equivalent of 11.5 billion dollars. It does most of its business in the domestic market (65%). The share of sales in Malaysia has doubled in the last year, from 5% to 10% of sales. The stock is trading on a P/E of less than 10. Despite a negative net profit in 2020, the non-ferrous metals specialist has good fundamentals and analysts are quite optimistic about the future.
Bond market

San Francisco Fed President Mary Daly expressed the need for the institution to continue to support an economy that is far from its targets. She added that she has not seen any pressure on wages and advocates patience before returning to higher interest rates. In this atmosphere, the Tbond managed to stabilize around 1.65%.

In Europe, calm prevailed with the bund falling to a level slightly below -0.35%, which places it at the lower end of its trading range for the current month. Other bond benchmarks moved directionless on the week, with neither the bulls nor the bears gaining any ground. The French OAT held its levels at -0.10%, as did Italy (0.60%) and Switzerland (-0.32%).

For its part, the Bank of Russia raised its key rate by 25 basis points to 4.5%, a first since 2018, taking economists by surprise. It justified its decision by an increase in inflation in the first quarter higher than expected.

The US 10-year is approaching 2%.

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Forex market

Inflation concerns are rising around the world as governments spend to combat the pandemic and adopt stricter traffic measures. This environment is shifting interest to safe haven currencies such as the yen and Swiss franc.

The weekly sequence that is ending will also have confirmed the dollar's advance. The outlook differential between the United States and Europe favors the greenback, which is taking advantage of this to return to test the USD 1.1780/1.18 support zone. Forex traders favor the U.S. currency amid concerns about the health crisis in the Old Continent.

On the other side of the Channel, profit-taking characterized the course of the pound sterling, which is trading at 1.16 against the euro (-100 basis points) and at 1.37 (-300 basis points) against the dollar.

In Turkey, the local currency is trading with extreme volatility, ending the week at 7.90, after quoting TRY 8.2 to the dollar. Turkish President Erdogan's decision to replace the head of the central bank has stirred the local currency market considerably.
Economic data

European statistics were few but apart from the current account balance (30.5B against 34.5B expected), they all exceeded expectations.

The manufacturing and services PMI indices rose to 62.4 and 48.8 respectively in the euro zone (58.8 and 47.8 for France, 50.8 and 66.6 for Germany). The German Zew index jumped to 96.6 from 93.1 expected (92.4 last month).

For once, figures were more contrasted in the U.S. GDP grew by 4.3% in the fourth quarter (final estimate) and weekly jobless claims fell to 684K. On the other hand, durable goods orders fell by 1.1% (consensus +0.7%), housing figures came in below expectations, as did the manufacturing and services PMI indices (at 59 and 60).
Hopes at the dawn of Q2

Investor optimism on the economic recovery is again fueling sector rotation. However, defensive stocks have benefited the most in recent days. It seems that the fall in technology stocks, which are sometimes overvalued, is causing lasting concern among traders.
With hopes of the "ultimate" wave of Covid-19, the expectation of Q1 results and the possible risk of a stock market bubble in certain sectors, traders are concentrating more than ever on quality stocks.