Weekly market update : Markets sail on sight in an ocean of cash

Friday March 20

Weekly market update

The Weekly market update is exceptionally published on Friday this week. Despite the coordinated action of central banks last weekend and the measures taken by governments to try to minimize the economic impact of the coronavirus, financial markets have just experienced another very turbulent week. Although there was a rebound on Thursday and Friday, risk aversion remained high as traders feared a global recession.

Indexes Over the past week, all indices have lost ground, limiting their losses in the last two days. In Asia, the Shanghai Composite lost 4.9%, the Nikkei 5% and the Hang Seng 5.2%. In Europe, at the time of writing, the CAC40 was losing 1.8% on a weekly basis. The Dax lost 2.9% and the Footsie 2.8%. For the peripheral countries of the euro zone, Portugal fell 3.7%, Spain 2.3% and Italy 0.2%. In the United States, the losses are much more significant. The Dow Jones is down 12.1%, the S&P500 is down 10% and the Nasdaq100 is down 6.7%, but it is still resilient, losing only 14.55% since January 1 (see chart). Nasdaq100 outperforms other indices

Commodities In an exceptional economic context, oil prices have undergone historical variations. Brent prices fell by nearly 25% during the weekly sequence before rebounding energetically to close the week down 10%. American oil producers might help regulate the market by reducing their supply, a major change of direction for the world's leading producer. Brent is thus trading around USD 30 while WTI is trading around USD 28 a barrel. Precious metals have not escaped the tsunami of sellers. However, it is clear that gold is limiting the breakage by rallying to a significant daily support at USD 1450 (see graph). This is not the case for silver, which plunges by more than 10% to USD 12.8. There is a big slide in the industrial metals segment. Weekly variations are strongly anchored in the red, like copper, which loses more than 15% at USD 4680 per metric ton. Gold's evolution

Equities markets 40% outperformance since January 1! Sartorius Stedim Biotech is a French company that supplies laboratories around the world with equipment for cell culture, filtration, fermentation, purification and fluid management. On the Paris stock exchange, the share price rose compared to its price on January 1. A feat that only concerns 4 out of 120 stocks. This did not prevent the share from losing ground at the end of the winter. But it remains a safe stock, with a trendy profile in the current context. The company is now worth €15 billion on the stock exchange, to the delight of its 74% shareholder, Sartorius AG of Germany. This makes it the 27th largest capitalization on the Paris stock exchange. The European Commission and the U.S. Federal Trade Commission have approved the acquisition of certain Danaher assets by Sartorius, for €825 million. Approximately one-third of this amount relates to the assets that will join SSB, which generate approximately $100 million in annual revenues. Performance of the Sartorius Stedim Biotech share compared to the Stoxx Europe 600 since January 1

Bond market The bond market has been on a bumpy ride this week. The containment and stimulus plans announced by the leaders worried traders, causing long-term rates to explode. The Italian 10-year BTP came close to 3.012% after starting the week at 1.941%. Likewise, the French 10-year rate touched 0.52% on Wednesday. The exceptional measures taken by the majority of the world's central banks have however succeeded in stopping the mad rate hike. To this end, the OAT ended the week at 0.95%, the BTP at 1.598% and the Bund at -0.324%, after a rise of more than 40%. High volatility was also seen on the other side of the Atlantic. The T-Bond thus closes this week at levels close to last week's level (0.995%), but after having experienced a fairly significant amplitude, with a high of 1.279% and a low of 0.634%.

Forex market The U.S. dollar stood out on the week, regaining its status as a safe haven in these troubled times. The euro fell to its lowest level in three years against the greenback on Thursday, as nothing seemed to be able to calm the rush of traders to the queen of currencies. The EUR/USD fell to USD 1.073. The dollar is also gaining ground against the yen, despite being called a safe haven, the USD/JPY pair is up to JPY 110. The GBP/USD pair also continues to fluctuate strongly, with the pound falling against the dollar to USD 1.18. The euro stabilized both against the Swiss franc at CHF 1.055 and against the yen at JPY 118.

Economic data Statistics have been relegated to the background this week, as traders remain focused on the numerous interventions by central banks. The Fed lowered its key rate by 1 point. It is also going to massively buy back bank, corporate and real estate debt, for an amount of at least 700 billion dollars, and announced that it will set up a temporary facility to provide liquidity to nine central banks, including Australia, South Korea, New Zealand and Singapore. For its part, the ECB unveiled a EUR 750 billion contingency plan for public and private debt buybacks, while the BoE lowered rates by 0.15 points and increased its asset repurchase program by £200 billion. On the macroeconomic front, China's industrial output fell 13.7% and retail sales fell 20.5%. In the United States, statistics were also disappointing, such as the 80K increase in weekly unemployment registrations (281K), the PhillyFed index at -12.7, or the Empire State Manufacturing Index at -21.5.

The market sails on sight in an ocean of cash Volatility continues to be exacerbated in equity markets, which are trying to catch their breath with the help of extraordinary measures taken jointly by policymakers and monetary institutions around the world. The VIX, the volatility index, has risen to its 2008 level by more than 80 points, reflecting a real panic situation in the financial markets. However, the stock market hemorrhage seems to be fading as the weekend approaches, and the effect of the deluge of liquidity promised to the market is starting to be felt. The hundreds of billions deployed by governments and central banks are thus tending to create a relative calm, a welcome break after the stormy weeks we have just gone through. In spite of everything, a feeling of powerlessness lingers, with economic players relying on the regression of Covid-19 to regain a confidence that has suddenly evaporated. This ocean of cash is saving time in the fight against the coronavirus, while investors are trying as best they can to stay the course by using the contamination curve as a compass.