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Monday September 23 | Weekly market update |
 | Taking advantage of the new measures to support central bankers, with a rate cut announced by the ECB and then by the Fed, stock markets have just completed a week of ups and downs, although many indices have managed to remain close to their annual or historical record. Geopolitical tensions in the Middle East were offset by the 25 basis point decline in the Federal Reserve and end-of-quarter balance sheet adjustments. Optimism also remains high before the upcoming resumption of Sino-American trade talks. |
| Indexes Over the past week, the differences have been insignificant, with the major indices moving in a scattered order. In Asia, the Nikkei recovered 0.4%, reversing its April highs, the Shanghai composite lost 0.8% and the Hang Seng dropped 3%. In Europe, the CAC40 recorded a weekly performance of +0.5%, setting a new annual record, while the Footsie also gained 0.4% and the Dax stagnated. The peripheral countries of the euro zone are generally flat on the week. In the United States, at the time of writing, the Dow Jones lost 0.2%, the S&P500 and the Nasdaq100 rose by 0.2%. |
| Commodities The drone attacks in Abqaiq and Khurai, two of Saudi Arabia's main oil fields, reduced Saudi production by more than half, corresponding to 5% of world supply. These events rekindled fears of conflict in the region, with Ryad and Washington pointing to Iran's role in the attacks. Oil prices have thus experienced historical increases (+14.6%) to date to around USD 64.7 (Brent). On the precious metals side, gold maintains the bullish trend and trades at USD 1500, while silver trades at USD 17.80 and palladium at USD 1630. In the agricultural commodities sector, cocoa has just seen an acceleration in its prices from USD 2100 to 2470, following the joint announcement by Côte d'Ivoire and Ghana to put a cap on cocoa production (see graph). Cocoa chart  |
| Equities markets JD Sports: At the top of the Footsie Founded in 1981 with a single store in the North West of England, JD Sports currently has more than 2400 stores worldwide. The largest sports brand retailer in the United Kingdom has successfully targeted young consumers, who are keen on fashionable sportswear. Its growth rate and fundamental profitability are at the root of a real stock market success, generating the highest valuation of the Footsie in 2019 (+90%). Despite the vagueness of Brexit, the company is maintaining its ambitious targets for this year with an expected profit of £424 million. Closure of underperforming stores, expansion of its clothing range and improvement of its margins are all factors that contribute to its profitability. The recent acquisition of the Footasylum brand is currently under review by the UK competition authorities and should provide it with an additional advantage. In addition, it is planned to open a new European warehouse in Belgium to avoid disruptions of Brexit. The European portfolio, managed by Surperformance, also acquired this share at the beginning of the year, a company detected by the internal StockScreener tool. Acceleration of the JD Sports title  |
| Bond market Central banks have resumed the path of easing, the ECB has largely met market expectations, even if the pace of purchases has been at the lower end of the expectations range at EUR 20 billion. Across the Atlantic, the Fed also respected the preferred scenario, i.e. a 25 point reduction in its base rate. The range is now 1.75% to 2%. Seven members voted for these -0.25%, one member for a 0.5% decrease and 2 people for a status quo. In this environment, 10-year yields evolve without major changes. US Treasury Bonds trade at a yield of 1.76%. Stability is also checked on European references. The Bund traded at -0.51% and the OAT at -0.21%. In Southern Europe, Spanish sovereign bonds (0.23%) and Italian sovereign bonds (0.86%) are also balanced, as investors are still looking for positive rates. On the other hand, the British ten-year rate fell to 0.64%, as did the interest rate on Greek debt, which fell to an all-time low of 1.33%. |
| Forex market While the major central banks did not particularly surprise traders and despite a significant shock on the oil market, volatility is easing even further on the exchange rate. The major parities therefore replicate last week's prices, such as the EUR/USD, which fluctuates between USD 1.10 and USD 1.11. On the other side of the Channel, the British pound is boosted by Junker's recent intervention, which does not exclude an agreement with the United Kingdom. The GBP/USD exchange rate rose by 200 basis points to 1,257, as did the EUR/GBP (0.88). The safe haven stocks, the yen and the Swiss franc, are slowly emerging from the forex traders' targets and are giving up some ground against the major currencies. To date, it takes 108 yen to get one dollar against the recent 106. More exotic, the Brazilian real is under pressure with the fall in Brazilian central bank rates, the USD / BRL pair rises to 4.16, or +1000 basis points on the weekly sequence (see graph). Return of the USD / BRL parity to its highest levels  |
| Economic data As anticipated in recent weeks, Jerome Powell announced a 25 basis point cut in the Fed's key interest rate, the second adjustment in two months to provide insurance against current risks, including weak global growth and trade tensions. However, it has raised its growth forecast for this year (to 2.2%), raising concerns that there will be no further rate cuts by the end of the year. Future decisions will depend on the evolution of economic data, but the Fed remains "ready" to pursue a more aggressive policy if necessary. For the moment, industrial production has exceeded expectations at 0.6%, real estate data was all better than expected, as was the PhillyFed index. In Europe, few statistics were on the agenda. The German Zew index surprised positively (-22.5 vs. -38 expected) and the CPI index was in line with euro zone expectations at 1%. This week, traders will be looking at PMI indices on both sides of the Atlantic, US growth for the second quarter (2% consensus) and durable goods orders (outside the traditional weekly publications).  |
| Central banks are promoting risk-taking Central banks have just set the scene: a monetary environment that is once again becoming massively accommodating. In a climate where the outlook is for the global economic slowdown confirmed by the OECD, and where protectionism is coming to the fore, the measures announced on both sides of the Atlantic could constitute a pillar for the global economy. Admittedly, in the face of the latent trade dispute, the scope of non-conventional monetary announcements should be limited. The market has therefore obtained the equivalent of its expectations in the monetary episode and will therefore focus on the tensions in the Persian Gulf and their impact on oil prices. Indeed, an oil shock would be very much to be feared in the event of an aggravation. For the time being, it must be noted that the index configurations on equities remain positive and that the central banks' actions have already encouraged operators to come back to risk-taking. |
