Monday
June 15		 Weekly market update
intro Last week was particularly hectic for financial markets, with renewed concerns about the coronavirus crisis in the United States and the Federal Reserve's discouraging statements, forecasting high unemployment for several years and a 6.5% drop in US GDP in 2020.
All sectors have thus been hit by profit-taking, following the marked rebound in recent weeks. Optimism about the recovery has thus faded somewhat, giving way to nervousness.

Indexes

Over the past week, most financial centres have lost ground.

In Asia, the Nikkei lost 2.44% (-3.7% since its high on Monday), the Hang Seng fell by 1.95% and Shanghai Composite by 0.28%.

In Europe, the losses are more significant, with the CAC40 down 7.1%, despite Friday's rebound.

The DAX recorded a weekly loss of 7.1% and the Footsie by 5.8%.

For the peripheral countries, Portugal fell by 4%, Spain by 6.8% and Italy by 5.5%.

In the U.S., despite its new historical records at the beginning of the week, the Nasdaq100 lost 1% over the week. The Dow Jones lost 5.5% and the S&P500 4.5%.



The S&P500 constructs a turnaround pattern below 3123 points

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Commodities

Oil prices fell last week week, weighed down by profit taking and fears of a slowdown in demand in case of a second wave of Covid-19. The rise in U.S. Crude Oil Inventories (+5.7M vs. -1.8M expected) accelerated this downward movement, overshadowing the latest forecast from the EIA, which was more optimistic by revising upwards its estimate of average Oil prices for this year. Brent dropped 8% to USD 38.8 , as did WTI at USD 35.5.

Gold remains in demand, especially this week, which marks the return, whether momentary or not, of risk aversion. The gold metal is gaining more than 3% to trade at USD 1736. Silver is not quite on the same trajectory this week, as it is moving horizontally at USD 17.65.

The rally continues in base metals, especially copper, which recorded another week's rise to USD 5,800.
Equities markets

Not a day goes by, especially since the end of lockdown restrictions, without an announcement on Nokia Oyj. In recent news, the contract signed with the Canadian operator Telus for the deployment of 5G or the work it carried on the network of Pakistani company PTCL.

An analyst from JPMorgan has just upgraded its recommendation to buy, underlining the recovery of its "free cash flow" which could return to a positive level and the fact that the investment cycle in favour of 5G is only just beginning.

Investors were quick to include the stock in their selection of "Telecom", an interest materialised by a 57% increase since the lows of March 23. This violent retracement allows it to be the leader of the EuroStoxx 50, with a 15% gain over 2020. A real performance for a stock that in recent years had suffered the assaults of sellers following the dislocation of its profitability.

Nokia's share is catching up

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Bond market

Government bond yields have fallen, in some cases significantly. The bond market rally was triggered by rising health risks in parts of the U.S. as well as a dovish meeting of the FED, where key U.S. monetary policymakers expressed concern about the possibility of a long and difficult economic recovery and sustained job losses. In response, the chairman of the institution, Mr Powell, stressed that the commission was prepared to keep the accelerator pedal depressed until the US labour market had recovered from the Covid-19 shock.

The drop in yield is confirmed on the US T-bond which is returning to a base of 0.69% (-10 basis points).

The German Bund also returned below -0.40%, while the French OAT saw its yield hesitating around the symbolic zero. The consequences of the trade-offs in favor of core European bonds pushed the yield on the Italian benchmark to a higher level of 1.51% and for Spain to 0.63%.

Highly sought-after thanks to its resilient currency, the 10-year Swiss yield remains negative at -0.48%.
Forex market

All it took was an intervention by the FED President to bring safe haven currencies back to the forefront, after a phase where investors had pushed the cursor in Risk ON mode. Arbitrage quickly turned to the yen, the big short-term winner. The USD/JPY pair is trading at 106.80, which is 300 basis points lower than a week ago. This upward trajectory for the Japanese currency is also true for the Swiss franc, as is the USD/CHF at 0.945 (-250 bps).

Forex traders took advantage of the recent massive and historic intervention by the European Central Bank to go long on the EUR/USD. The chart extension beyond the USD 1.1220 was out of the news since the first week of March and the start of the European lockdown. The single currency was able to trade as high as USD 1.1422, before suffering profit taking. Despite this slight pullback, experts agree that the change in polarity occurred on the single currency, long under the yoke of sellers, who could observe a balance of power between the bears and the bulls. This stabilisation could symbolise the return of investor confidence in the euro area, which is reflected in the narrowing of interest rate spreads on the bond market.

After a major rally due to the reopening of the Chinese economy and the rise of gold, the Australian dollar suffered profit-taking at USD 0.682 against the greenback and especially against the yen at 73 (-400 basis points compared to the recent peak). This decline of the southern hemisphere currency corroborates with a weakening of the currencies of oil exporting countries such as the Canadian dollar, the Mexican peso and the ruble.

Evolution of the yen against the dollar and the euro

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Economic data

Last week was not busy in terms of European statistics. GDP was slightly better than expected in the Euro-Zone (-3.6% vs. -3.8% expected), as was Industrial Production at -17.1% (consensus -19%). In France, industrial production fell by 20.1% and in Germany by 17.9%, and in both countries the trade balance disappointed.

In the United States, in addition to the Fed's announcements that focused attention, the CPI index fell by 0.1% and the PPI index rose by 0.4%. Weekly jobless claims were slightly below expectations at 1542K (consensus 1550 and 1897K last week).

For the coming sessions, Retail Sales, Industrial Production, Building Permits and Housing Starts, as well as the PhillyFed index will set the pace for the week on the American side. In Europe, few figures are on the agenda: Trade Balance, Zew index and CPI index.
Price volatility persists

Experts had struggled to justify the violent bullish moves of indices. Interventions by central banks and the reopening of economies were not enough to explain such rapid movement, even if hopes of a V-shaped recovery were high.

But uncertainty persists. Most of the world is in recession. The gap between the financial and economic reality was only hanging by a thread. The FED speech had an impact on Wall Street, of course, but also on all the world's stock exchanges. Even the impetuous Nadasq 100, after a series of new records, dropped 500 points on intraday.

Price instability persists and continues to support volatility, which has not eased, even during the strong upward acceleration of indices. If the context persists, it would favor the return of winning stocks from the health crisis, which have come off the radar in recent weeks.