Weekly market update : After central banks, investors look ahead to earnings season

Central banks look a bit lost, and so do investors in the current economic climate. There are those who don't do anything but threaten to (Fed, BoE), those who should have done something but didn't (SNB), those who did something but promised not to (ECB). And the one that never does anything (BoJ). All of which has led to a resurgence in volatility, as the financial markets have not taken kindly to the Fed's talk of further tightening between now and the end of the year, and the prospect of high interest rates for longer than expected in the USA and Europe. The renewed pressure on prices caused by soaring oil prices also contributed to the return of inflationary tensions.

Weekly variations* US 500 4320  -2.93% HUMANA INC. +4.95% THE ALLSTATE CORPORA... +4.88% ASSURANT, INC. +4.59% MGM RESORTS INTERNAT... -11.05% MODERNA, INC. -12.74% CAESARS ENTERTAINMEN... -12.99% DOW JONES INDUST... 33963.84  -1.89% NASDAQ 100 14701.10  -3.30% FTSE 100 7683.91  -0.36% GOLD 1925.01$  +0.09% WTI 90.04$  -0.16% EURO / US DOLLAR 1.06$  -0.22%

This week's gainers and losers

Gainers: Splunk (+20%): Cisco will buy the cybersecurity specialist at USD 157 per share to strengthen its offering. The total price tag is $28 billion. The proposal is firm because the price has already been negotiated between the protagonists. The offer is therefore said to be "friendly". The offer was a bit of a wake-up call this week for a tech sector in the throes of doubt following the Fed's tough talk on interest rates. Losers: S4 Capital (-26%): The trendy advertising agency, headed by the charismatic and very opinionated Martin Sorrell, sank on the stock market this week, after lowering its targets. That's the problem with market darlings who systematically exceed expectations: when they stop, the backlash is often terrible. The other problem is that this is the second warning in two months. Hence the severity of the punishment. ARM Holdings (-14%): After a very successful debut on the stock market, the SoftBank portfolio company took a breather, falling back to around USD 53. The stock, introduced at USD 51, had risen as high as USD 69 in the first few hours of trading. Investors are weighing up FOMO against current fears about the trajectory of equity markets. Block (-14%): Shares dropped after the company announced that the CEO of its Square payments unit, Alyssa Henry, will leave the company at the start of next month. Jack Dorsey will take over responsibilities. Investors are unsure of what this means for the business.

Commodities

Energy:Oil prices stabilized after three weeks of strong gains. The more hawkish tone of the Federal Reserve, which warned that key rates could remain high for longer than financials thought, weighed on risk assets, including oil. Nevertheless, price consolidation is proceeding smoothly for the time being, with Brent still trading at around USD 93. WTI has even gained ground over the past five days on the back of weak US inventories. The US benchmark is trading at around USD 90.50 a barrel. In Europe, natural gas prices are back on the rise at 40 EUR/MWh, despite the end of strikes at Chevron's liquefied natural gas facilities in Australia. Metals: Copper is proving less resilient than oil and is back on a downward trend. The latest data from the London Metal Exchange didn't help, as it showed a further rise in copper inventories, allaying concerns about supply difficulties. On the price front, copper fell to USD 8,100 per tonne. In precious metals, gold treaded water this week at USD 1925. This is a rather good performance, given the rise in bond yields. Agricultural products: Following the example of the energy and metals compartments, grain prices declined this week in Chicago, with a bushel of corn trading at around 475 cents versus 590 cents for a bushel of wheat.

Macroeconomics

Atmosphere: The hawks are out. The Bank of Japan has just closed the central bank ball and, oh surprise, has done nothing! Understandably, its rates are unchanged and its stance very accommodating. Unfortunately, the same cannot be said of the Bank of England and the US Federal Reserve. Although they have left their key rates unchanged, they have maintained a hawkish stance. In other words, they are in the "rates are going to stay high for a long time" camp, for most if not all of next year. And without ruling out further rate hikes to combat inflation. That's all it took for US 10-year yields to surpass the highs recorded last October, at 4.33%, paving the way for a continuation of the upward trend towards 5%. The collateral effect is to put pressure back on US equities, with increased risk on technology stocks. Against this backdrop, the dollar is doing well. It is keeping other currencies under pressure, even though the euro rebounded on Friday, climbing back to USD 1.0649. In addition, the Swiss National Bank's unexpected standstill on interest rates on Thursday gave the single currency a slight boost to CHF 0.9644. Lastly, the leading PMI indicators for the major European economies are still in contraction territory, despite a tremor in services in Germany and a twitch in industry in the UK. In the US business activity remained steady in September. The US Composite PMI index, which tracks the manufacturing and service sectors, inched down to 50.1 in September from a 50.2 in August.  Crypto: Bitcoin remains in equilibrium this week, hovering around $26600 at the time of writing. Ether suffers a little more than the market leader, dropping 1.63% since Monday, to fall back below the $1600 mark. As the U.S. Securities and Exchange Commission (SEC) continues to tighten the screws on crypto-asset legal compliance, the industry is desperately looking for positive vibes to retain some optimism. For the time being, without a clear regulatory framework and coupled with an economic climate that is unfavorable for risky assets, the crypto-currency market is still unable to recapture investor fervor.

After central banks, investors look ahead to earnings season The big wave of central bank decisions has passed, and companies are preparing for Q3 earnings releases, which start in three weeks' time. The news will be a little lighter next week, but far from nil. On the macroeconomic front, Europe will be following the German Ifo index (Monday) and the preliminary estimate of German inflation (Thursday). In the United States, the Conference Board's US consumer confidence index (Tuesday) will precede durable goods orders and a speech by Jerome Powell on Wednesday (after all, central banks haven't totally disappeared). On Friday, European September preliminary inflation and US PCE inflation will share the limelight. We also have a few earnings reports, with Costco and Cintas on Tuesday, Micron and Hennes & Mauritz on Wednesday, and Accenture and Nike on Thursday. An great weekend to all.

Things to read this week

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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.