Weekly market update : A falling tree makes more noise than a growing forest
01/14/2022 | 11:53am EST
Financial markets suffered further declines this week, rattled by inflation figures in the United States, which strengthen the case for an earlier-than-expected rate hike. Once again, US technology stocks took the biggest hit, while in Europe luxury goods stocks struggled. However, banking and oil stocks have done well.
Zynga (+51%): The Californian game publisher has received a $12.7 billion takeover offer from Take-Two Interactive, the father of GTA, which wants to expand into mobile. The stock is up 51% for the week.
Servicenow (-10%): The specialist in web-based tools for businesses is one of the Nasdaq stocks that has been heckled this week because of its generous valuation.
Nexstar Media Group (+9.4%), already the largest broadcasting group in the US, is in negotiations with ViacomCBS and WarnerMedia to acquire a stake in the CW Network. It also wants to develop 20 additional markets.
Hard blow for Carvana (11.8%) Its rival, General Motors, has stepped on its toes by announcing the launch of CarBravo, a site dedicated to the sale of used cars.
Oil prices have risen again, for the fourth week in a row. As a result, oil prices are back within striking distance of their 2021 peak, at USD 85 for Brent and USD 83 for the US benchmark. The environment remains favorable for black gold despite the acceleration of the global pandemic. With a falling dollar, supply problems, geopolitical tensions and strict production controls by OPEC+ countries, the stars are aligned in favor of oil and the energy segment in general. Also, U.S. commercial inventories have once again declined and now stand at their lowest level since October 2018.
Industrial metals prices remain firm. China continues to drive demand, evidenced by the latest monthly import data from Beijing, which remains buoyant overall. Nickel stood out as it broke through the USD 22,000 per metric ton mark, a 10-year high. Indonesia, a real heavyweight in the sector, continues to press prices upwards due to its desire to tax ferronickel exports, the aim being to process nickel ores locally. In terms of precious metals, gold and silver have gained ground, albeit modestly. The barbarian relic is trading at USD 1,820, compared to USD 23.10 for silver.
In agricultural commodities, the USDA lowered its estimate for global soybean production due to abnormally dry weather in South America. The agency also sees an easing of the wheat market due to deteriorating demand, which is expected to result in higher U.S. stocks. As a result, wheat prices in Chicago fell to 746 cents per bushel.
Initially a little deaf to the prospects of a more restrictive monetary policy, equity markets had a rude awakening last week when they realized that the Fed could proceed with four rate hikes this year to counter inflation. The message came through in a somewhat painful way for stock market indexes, especially those rich in technology stocks and more generally in so-called growth stocks. If the U.S. central bank acts as planned, liquidity will be less abundant, forcing investors to be more selective.
Over the week, and somewhat counter-intuitively, it was the euro that rallied to USD 1.4511, its best level since November. In fact, December's U.S. inflation numbers, measured at 7% year-over-year (not seen since 1982), created a bit of a stir, but traders believe that the start of the Fed's actual rate hike, likely in March, will provide a strong case for the greenback. The dollar also lost ground against the yen, at JPY 113.508, and most other currencies. The euro/Swiss franc pair is trading at CHF 1.0425.
After a 30-point rise in a month, the yield on the 10-year US T-Bond looks to be easing to around 1.71%. The Bund still offers a negative yield of -0.09% and the French OAT now looks firmly anchored in positive territory at 0.29%. Even Dutch debt is back in the black.
Next week, China's Q4 2021 GDP will kick off the week, before a Bank of Japan monetary policy decision on Tuesday. Several statistics are scheduled in the US, but none of major importance.
On the bitcoin side, the price of the market leader in digital assets is stabilizing around $42,000 this week. Elon Musk took to Twitter again today to boost his "dogecoin" darling, mentioning that some of his Tesla products will be available for purchase with the cryptocurrency. Only a few goodies are for sale. No authentic Tesla cars. Comedy stunt? Probably. The price of the asset shot up more than 10%.
A falling tree makes more noise than a growing forest
As earnings season begins with banking stocks in the US, traders seem to be anticipating a slowdown in growth despite the rather good initial figures published by financial players. A potential catch-up is anticipated as inflation is in full swing and interest rates could rise faster than expected.
Things to read this week
Investing in bicycles pays off Key players in the sector include: Shimano: no need to introduce the Japanese group, whose modules have been omnipresent on bikes for a long time.... Read more
Analysis-A people's Fed? It's starting to at least look that way Of the 105 directors on the newly named 2022 boards, 44% are women, and a record 40% are Black, Hispanic, or... Read more
Early holiday shopping depressed U.S. retail sales in December Economists cautioned against reading the unexpected plunge in retail sales last month reported by the Commerce... Read more
*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.