Weekly market update : Indexes rose in a bear market
06/03/2022 | 05:00pm EDT
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Despite concerns about inflation, financial markets were volatile but recorded a positive weekly result. The trend was supported in particular by the easing of health restrictions in China, as well as new stimulus measures in the country. The rebound in US technology stocks also helped.
KE Holdings (+28%): The Wall Street-listed Chinese real estate brokerage that unexpectedly posted a profit in the first quarter, despite a difficult context in China. Analysts' recommendations are upbeat.
Amazon (6.6%) The e-commerce company has seen its stock going up after having announced a split stock 20-1.
Okta (+22%): The U.S. platform that enables authentication and data security is up after increasing its outlook, while other companies are reducing their outlook.
Salesforce (+14.1%) reassured the market with its quarterly earnings. While the revenue guidance for the next financial year was slightly revised down, its margin guidance was raised.
Datadog (+12.2%): The U.S. monitoring software company, is benefiting from its partnership with database software developer MongoDB, which reported better-than-expected quarterly results.
Affirm (-12.9%) a specialist in deferred payment, is facing headwinds. Inflation, rising interest rates and increasing late payments are putting a damper on the sector, where competition is fierce. Its revenues are up, but the share price is down.
British company John Wood (-10.7%) will sell its built environment consulting unit for $1.9 billion. The market was hoping for a slightly higher price, which explains the share decline. .
B&M European Value Retail(-15.3%): The share price plummeted, following its latest earnings report. The discount retailer is struggling to fight inflation, despite being a store most shoppers would gravitate to during tough times.
Doordash (-6.7%) completed this week the acquisition of Finnish rival Wolt for more than $8 billion in stock, but the American group already expects a decline in Wolt's sales volumes.
Regeneron Pharmaceutical (-8.5%): The US company has seen its stock fall after buying the rights to cancer drug Libtayo from Sanofi, because investors think the deal was too expensive.
Oil: Prices have been on a roller coaster ride again this week. The member countries of the European Union have finally agreed on a ban on Russian oil. It's a ban that is limited, however, since it only concerns imports by sea. Pipelines are not targeted, a compromise that will buy time to deal with the problems of the dependence of Central European countries on Russian oil. In parallel, OPEC+, which held a meeting this week, decided to increase its production slightly more than expected in July and August (648 million barrels per day more, instead of 432 million more than in the previous months). However, with most members struggling to meet their production quotas, it is difficult to see OPEC+ production increasing significantly in the coming months, especially if Russian production declines. In terms of prices, Brent is trading near USD 118 per barrel while the US benchmark, WTI, is trading around USD 117.
Metals: China continues to blow hot and cold on metals prices. By unveiling a new support plan targeting renewable energy, Beijing has boosted the prices of metals that are particularly sensitive to this issue, such as nickel and tin. The latter are trading at USD 27710 and USD 35250 respectively in London. Copper has also risen to USD 9455 per metric ton. In precious metals, gold and silver are struggling to rebound and are trading at USD 1862 and USD 22.2 respectively.
Agricultural products: Wheat prices fell sharply in Chicago to 1050 cents per bushel. The return to international markets of some Ukrainian supply, which transits through the Black Sea, is a game changer in the short term and could ease supply shortages around the world. However, this resumption of shipments is still fragile and will have to be sustained by an agreement with Russia, which will have to commit to ensure secure access to Ukrainian ports.
Atmosphere: Bad news? Good news! Things are improving on financial markets with the return of a good old habit: any signal likely to weigh on the Fed's rate hike is welcomed. So a weak macroeconomic statistic invariably triggers the "if things get worse, the Fed will be forced to limit its rate hikes" reasoning. We hold on to what we can. At the same time, the hope of a Chinese awakening with the easing of confinements in the country creates a slightly more buoyant climate.
Rates: U.S. yields pretended to retreat at the beginning of the week, as investors believed that the Fed would soften its stance in the face of less buoyant economic statistics. But they recovered fairly quickly, with the 10-year maturity paying around 2.98%, up from 2.73% at the end of last week. In the meantime, central bankers Loretta Mester and Lael Brainard explained that rates might also have to be raised in September. In Europe, the week was also marked by a sharp rise in rates. German 10-year debt reached 1.27%, French 10-year debt reached 1.80% and Italian 10-year debt reached 3.4%. The ECB will update on its rates next week, while markets expect it to set the stage for a rate hike at its next meeting in July.
Currencies: With the exception of the U.S. dollar's rebound against the yen, there were no big swings in the major currency pairs over the week. The euro struggled for direction to finish at USD 1.0727 , fairly close to its level from last Friday. The Dollar Index is almost unchanged from last week around 101.89 points. Since January 1, the greenback has gained 13% against the yen, 8% against the British pound and 6% against the euro. It should be noted that currency effects are not trivial for companies, even multinationals: Microsoft has revised this week downward its targets because of the strength of the dollar.
Cryptocurrencies: For its part, bitcoin could end a streak of 9 consecutive weeks of decline if it closes above USD 29,500 on Sunday night. For now, it is hovering around USD 30,000 at the time of writing. After shedding more than 30% of its capitalization over the past two months, the digital currency is still not out of the woods in this very deteriorated macroeconomic environment and may yet test the nerves of crypto-investors during this June.
Calendar: The ECB meets on Thursday, June 9 to decide on its monetary policy stance. The next day, the US Bureau of Statistics will release May inflation figures in the US, which will determine whether the high point has been passed and how fast the decline is starting. Unless...
Indexes rose in a bear market
Markets rallied this week, although Friday was difficult for Wall Street's after Elon Musk voiced concerns about the state of the economy. The market has taken on board the less accommodative policy of the US central bank and seems to be less spooked by the possible recession ahead. Inflation may have peaked in March and April in the U.S., but there is still some way to go before the Fed reaches its 2% inflation target. The Fed could continue to raise rates for a while longer, but it would not be too upset about it. So caution is the order of the day in the medium term. Have a good weekend to all investors!
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*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.