Weekly market update : Too much optimism

As the Fed's rate decision approaches, risk aversion has abruptly resurfaced this week, with fears of global inflation and recession, as the World Bank has just warned. Contrary to previous expectations, U.S. inflation did not take the nice downward slope that the market had imagined, raising fears of another aggressive tightening next week by the Federal Reserve. Bond yields continue to rise and indexes are logically undergoing further declines. Volatility is not expected to abate.

Weekly variations* US 500 3873  -4.77% ROYAL CARIBBEAN GROU... +6.77% APA CORPORATION +6.22% NORWEGIAN CRUISE LIN... +4.86% NUCOR -18.45% FEDEX CORPORATION -22.98% ADOBE INC. -24.13% DOW JONES INDUST... 30822.42  -4.13% NASDAQ 100 11861.38  -5.77% FTSE 100 7236.68  -1.56% GOLD 1674.82$  -2.54% WTI 85.28$  -1.19% EURO / US DOLLAR 1.00$  -0.61%

This week's gainers and losers

Gainers: Nio ( +12.3%) the Chinese manufacturer of electric vehicles, benefits from the support of Citic Securities, which praises the company's good commercial performance in August, highlighting its high-end positioning. Big Technologies (+20%) The small British remote monitoring group has improved its half-year results beyond expectations. It is one of the few European stocks to do well this week.  Draftkings (+9%) The American sports betting specialist posted better-than-expected results, the number of paying customers and the average revenue per user are up by 30% over the year, so it raised its outlook for the year.  The consumer cyclical sector struggled this week. The whole sector? No, because the automotive sector held up well, with cheap buybacks on several low-valued names. French group Renault gains 6.5% Inditex (+4%) once again stands out, writes Jefferies after it posted its quarterly results, in particular because a large part of its suppliers are in Europe. The group also says it is increasing its inventories to mitigate future problems. +4% Losers: Orpea (32.9%) The controversial nursing home operator, announced that its margins will suffer from energy costs in the second half of the year. The refinancing plan is not enough to reassure. Oddo BHF has slashed its price target on the stock, which is down  MIPS-(31.5%) the Swedish specialist in technologies that equip protective helmets for cyclists and motorcyclists, is struggling. The bicycle market is in decline, and retailers are reducing their purchases.  The market is not digesting the $20 billion takeover of the design software company Figma by tech giant Adobe. The transaction is considered too expensive and risky. Adobe tumbled after the announcement. -21.7% Ocado (-13.1%) the British online supermarket, has lowered its sales outlook for 2022. Consumers are turning to cheaper products and reducing their average basket, amid soaring prices.  Meta Platforms (-11.6%) Mark Zuckerberg's group, looks like it has become a leveraged stock on the Nasdaq. When the US index falls, the company is often punished more than the market average.

Commodities

Energy: The ongoing economic slowdown and its impact on oil demand, particularly in China, continues to affect investor sentiment. In its latest monthly market report, the International Energy Agency estimates that Chinese oil demand is expected to fall by 420,000 barrels per day this year. As a result, oil prices are poised for a third consecutive week of declines and are trading near their lows for the year, with European Brent at USD 91 and U.S. WTI at USD 84 per barrel. In Europe, the European Union's energy ministers continue to work on a plan to avoid a further spike in gas prices. A cap on Russian gas prices was finally set aside in favor of a tax on oil companies' super-profits and an energy sobriety plan for the coming winter. Metals: The return of risk aversion weighed on the barometer of the global economy, copper, which lost ground this week at USD 7730. Aluminum held up better due to bad news on the supply side, as Chinese smelters may cut production further due to electricity rationing in some Chinese provinces. Aluminum is trading slightly above USD 2300 on the LME. In precious metals, gold broke down to the USD 1,700 per ounce mark. The inflationary context is definitely not benefiting the barbarian relic, penalized by the tightening of the Federal Reserve's monetary policy and the rise in bond yields that goes with it. Agricultural products: Grain prices have generally stabilized in Chicago, where wheat and corn are trading at 840 and 670 cents per bushel respectively. Ukraine said winter grain plantings are expected to fall by about a third from last year, due to the war but also to higher fertilizer prices.

Macroeconomics

Atmosphere: A heavy blow. The market thought that US inflation had started to decline. August's figures proved that it had not. The discrepancy between investor sentiment and macroeconomic reality caused an earthquake on Tuesday, visible in the drop of more than 4% in the S&P500 and more than 5% in the Nasdaq. Unraveling the complex and insidious mechanics of inflation will take time, probably more time than is generally thought. In a fast-paced world where everything has to be spectacular, finance seems to have forgotten that it is sometimes necessary to move slowly. Currencies: The euro regained some ground on the pound sterling, at GBP  0.8746 for EUR 1. Against the greenback, the single currency is back around parity. Central banks are competing for firmness, which has created a sort of status quo this week. However, the turmoil on equity markets tends to push investors back into less risky assets, so there is some fundamental support for the US dollar at the moment. Rates: The release of higher-than-expected inflation in the U.S. in August pushed U.S. debt yields back up to 3.47% on the 10-year. The 2-year yield climbed to 3.9%. In Europe, a similarly combative ECB has helped to raise the stakes. Ten-year rates range from 4.25% in Greece to 1.03% in Switzerland. The Bund is at 1.77% and the OAT at 2.32%. Cryptocurrencies: Last week's surge in cryptocurrencies was wiped out by Tuesday's relapse in risk assets. Bitcoin is once again trading below the USD 20,000 mark. As for Ether, the last few days have been difficult: the major technical shift that took place during the week on the Ethereum blockchain went well, but speculators chose to "sell the news" instead. Timeline: Central banks are making a comeback. At the same time, they are never far away. The Fed's monetary policy decision on Wednesday 21, followed by the Bank of Japan, the Swiss National Bank and the Bank of England on Thursday 22, will be very busy next week. To complete the picture, the PMI indicators for the major economies will arrive on Friday 24.

Too much optimism Equity markets lost all or part of their gains from the previous week in four days. Investors were too confident about the trajectory of consumer prices in the United States. The return of risk aversion is symbolized by the Nasdaq's drop of more than 5% on Tuesday, in the wake of US inflation figures. Meanwhile, China is struggling to recover and Europe is still mired in its energy crisis. The year 2022 is a stark reminder to investors that the gentle torpor that dominated the previous decade is over. Nervousness is to be expected until next week's announcement of the Fed's monetary policy decision. And maybe even after that... Until then, have a good weekend.

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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.