Lower-than-expected inflation in the US and a less aggressive intervention by the Federal Reserve in September pushed financial markets higher this week. Risk appetite seems to be intact for the time being, despite the looming recession. The overall better-than-expected corporate results have kept the buying current going during this summer period.
The Trade Desk(+35.6%) : It was one of the top performers this week. The return of investors' appetite for technology has largely benefited the digital marketing company, which also reassured investors with quarterly results in line with expectations.
Shockwave Medical (+26.2%): The cardiac medicine device specialist, posted better-than-expected quarterly results. On the strength of a favorable first half, the group has raised its annual sales range.
Aviva (+16.3%): The british insurer reported a larger-than-expected increase in half-year operating profit, thanks in particular to rate hikes. It announced a share buyback, without specifying the amount.
Nielsen (+19.36%): The American specialist in information and measurement services is on the rise after talks with WindAcre came to an end.
Occidental Petroleum (+11.3%): Berkshire Hathaway increased its position to 20.2%, as Warren Buffett strengthens his bet in the oil sector.
XP Inc(-21%):The Brazilian broker listed in the United States, disappointed investors, in a difficult context for the investment sector. JP Morgan Chase lowered its recommendation from overweight to neutral.
Palantir(-17.7%): The analytics software specialist, reported mediocre quarterly results and reduced its annual forecasts, due to inflation and the postponement of several large contracts with the US government.
GSK (-12.3%): As well as the French company Sanofi and its spin-off Haleon, are shaken by the return of the Zantac case, the heartburn drug that allegedly contains a carcinogenic agent. The trial will begin on August 22.
Warner Bros Discovery (-10.2%): The companycontinues to suffer the consequences of revising its targets down last Friday.
Illumina (-7.3%) : The manufacturer of integrated systems dedicated to the analysis of genetic variation is down after reporting results below analysts' expectations. Analysts revised their forecasts downwards.
Highlights: Another week of gains in the commodities markets, with the CRB Commodities Index up 3.6% in just five days. The energy sector continues to progress despite the rise of the greenback.
Oil: Bearish week for oil. The price of black gold is around USD 95 per barrel for Brent, and USD 92 for WTI. This is a drop of around 30 dollars since the June peaks. This decline, as the International Energy Agency (IEA) points out, is mainly due to an increase in supply. With an average of 100.5 million barrels per day in July, we are reaching the highest levels since January 2020, just before the start of the pandemic. Yet demand remains strong. With the agency having revised its 2022 estimate upward by 380,000 barrels per day to 99.7 mb/d.
Metals: The mood in the precious metals segment is still one of rebound. The return of risk appetite, palpable in recent sessions, is benefiting gold buyers. The barbarian relic is trading around USD 1793. Industrial metals are also gaining some ground since the latest Fed rate hike. Lead is trading at USD 328, copper is gaining some height at USD 572 while aluminum is stagnating at USD 156.
Agricultural products: Corn prices have recovered significantly in Chicago, while wheat is stalling. Still in the soft commodities register, the price of lumber recovered some color at USD 593 per thousand board feet.
Ambiance: Finally some good news! For the first time in months, US inflation is cooling. Investors roared with pleasure at this announcement, especially for the benefit of highly leveraged stocks. But they did not roar for long, as if they needed confirmation to continue the rebound that began in July. Thursday's announcement of lower producer prices could have been that confirmation, but it wasn't really the case. Still, price normalization is an important step to improve macroeconomic visibility.
Rates: The yield curve is still inverted in the United States, where the yield on the 10-year maturity is 2.85%, compared with 3.19% for the 2-year. The market is sticking to its guns, believing that short-term economic conditions are deteriorating. It's hard to argue with that. But the publication of less vigorous inflation than expected in July has caused a downward revision of projections for a rate hike: the majority of the market is counting on a 50-point rate increase by the Fed in September, instead of a 75 basis point one. In Europe, the ECB is working to avoid an increase in the spread between German (0.95%) and Italian (3.03%) debt. The French OAT is at 1.52% over 10 years.
Currencies: The euro has regained some color against the dollar. It is back at USD 1.03, a level it had sunk to in early July. However, the single currency remains down 9.5% since the beginning of the year and is also suffering against the franc, at CHF 0.9705. The greenback lost ground against the major currencies after the release of inflation figures on Wednesday, which suggest a potentially shorter-than-expected monetary tightening cycle. The Dollar Index fell back to around 105 points.
Cryptocurrencies: In the wake of U.S. stock indexes, bitcoin continued its ascent this week and is now hovering around $24,000 as of this writing. For its part, ether is clearly outperforming the market leader, rising 6 times since the beginning of August. ETH is thus back to sailing around the $1,900 mark after having passed under the psychological threshold of $1,000 in June. A crazy progression that can be explained above all by a renewed appetite of investors for risky assets in recent weeks.
Calendar: The main statistic of the next week is expected on Wednesday with the July retail sales in the United States. On the same day, the U.S. central bank will release the detailed minutes of its latest meeting. Other highlights include Chinese retail sales (Sunday night) and UK inflation for July (Wednesday).
Let's Not Get Carried Away
This week saw good news on inflation, which came out at 8.5% year-on-year in the US. This is lower than the 40-year old record set in June at 9.1%. This is the beginning of an inflection, which will perhaps be confirmed in the weeks to come, allowing us to say that we have finally passed a historical peak. But let's not get carried away too quickly. It is far too early to place the economic recovery scenario as the central scenario, especially since many other parameters come into play in defining a recession. Caution is advised after this strong rebound on major stock markets.
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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.