Weekly market update : Optimism prevails

Monday November  4

Weekly market update

The good results of the listed heavyweights, the decline in Fed rates as well as hopes for trade and Brexit allowed the financial markets to continue their rise this week, despite mixed statistics. Risk appetite therefore remains intact in this period of optimism on all fronts.

Indexes Over the past week, many indices have set new annual or even historical records. In Asia, the Nikkei recorded a weekly performance of 0.2%, the Hang Seng gained 1.5% while the Shanghai Composite grabbed 0.1% with difficulty. In Europe, at the time of writing this point, green is dominant.The CAC40 reaped 0.8% over the week, the Dax 0.6% while the Footsie lost 0.4%. For the peripheral countries of the euro zone, Portugal lost 0.1% and Spain 1.2%. In the United States, the Nasdaq100 and S&P500 recorded new historical high points, gaining 1.3% over the week. The Dow Jones also returned 1.3%. New bullish momentum for the Nasdaq100

Commodities Disappointing statistics in China and the robustness of the US supply have both weighed on oil prices this week. The European benchmark is thus once again below USD 60 per barrel, while WTI is trading at around USD 54. While equity markets are reaching new stock market highs, investors' appetite for risky assets in no way weakens the current upward trend in gold prices. The gold metal stabilizes and attempts a new forward march beyond USD 1500 (see graph). Money is following the same trajectory this week and is beginning a new extraction attempt above USD 18 per ounce. On the industrial metals side, the time has come for consolidation. Weekly gains are indeed sluggish, such as the stagnation of zinc at USD 2543 per metric tonne, or nickel at USD 16835. Gold stabilizes Gold evolves in a horizontal corridor, framed by two distinct boundaries.

Equities markets Tesla The corporate results bring their share of surprises every quarter. Tesla's latest press release is one of the surprising announcements. The car manufacturer made money in the third quarter, the first time since June 2018. Before moving on to the production of the "Y" model in 2020, it was appropriate for the group to present investors with a better momentum. Net income amounted to USD 143 million, a real achievement after the 1.1 billion losses in the first half. This situation had caused Elon Musk's company to lose half of its market capitalization in the first half of 2019, before rebounding again and limiting its annual loss to -5%. The group, based in the San Francisco Bay Area, stated in its recent press release that operating expenses are at their lowest level since the production of the "Model 3". October therefore enabled the electric car manufacturer to achieve a dream stock market performance (+30%), thus entering the top 3 of the most advanced stocks within the Nasdaq over this reference period. Tesla's breakout

Bond market Government bonds were again sought over the week. Yields fell throughout the curve. Indeed, the Bund was down to -0.41% and the French OAT to -0.10%. The FED's decision to reduce its rates by 25 basis points is a factor in this downward trend in yields. The same trend is repeated in the Swiss 10-year contract, with a rate of -0.61%. The American Tbond is not exempt from this decline in sellers, the rate drops to 1.68%, a decrease of 10 basis points. For their part, the Italian debt stabilises at 0.92% and the Spanish 10-year benchmark (0.23%). In Asia, Japan recorded another negative week, with a yield of -0.19% for the main bond.

Forex market The currency market has shown little volatility over the recent weekly sequence. Intraday spreads remain modest in a dispute where the various published statistics paint a mixed picture of the global economy and more especially the American economy. The day after the Fed, the greenback remains under pressure. The EUR/USD exchange rate rose by 50 basis points to USD 1,1150. The dollar also lost ground against the yen at JPY 108. Across the Channel, the pound sterling is frozen at last week's levels, like the series on Brexit, whose episodes follow one another endlessly. GBP/CHF is traded at 1.28 as is cable (GBP/USD) at 1.29 or EUR/GBP at 0.863. Forex traders intensified their short positions on the Canadian dollar, which fell sharply. The Loonie (USD/CAD) traded at 1.32, up 200 basis points. The Toronto currency is suffering from the decline in WTI and the recent GDP release up 0.1% versus the 0.2% expected for August.

Economic data The event expected by traders was in Washington where the Fed met market expectations, despite fundamental data indicating a more cautious approach. Indeed, the US central bank lowered the target range for federal funds by 25 basis points to 1.50%-1.75%. Powell pointed to a pause in further cuts, unless the economic outlook changes significantly. In Europe, on the ECB side, Christine Lagarde, who succeeds Mario Draghi as President, believes that the eurozone countries in budget surplus had "not really made the necessary efforts" to support growth. It targeted Germany and the Netherlands in particular. The release of the monthly US Employment Report was better than expected. The unemployment rate stood at 3.6% but 128K jobs were created (90K consensus). Last month's figure has also been revised upwards from 136K to 180K. As for the famous manufacturing ISM, it stood at 48.3, once again highlighting the fragility of the industry, even if the figure appears higher than last month (47.8). On the other hand, for China, the purchasing managers' index for the manufacturing sector stood at 51.7 in October compared to 51.4 in September. This is the highest level since February 2017. This week investors will be able to see the level of activity in the service sector, a real growth support in the United States.

Optimism prevails Optimism remains predominant in the financial markets, with two months to go before the end of the year. Not only has the European Union announced that it is ready to grant the United Kingdom an extension for Brexit until the end of January, but the prospect of further progress in the trade dispute between the United States and China has also improved the mood. October, often considered as a month in which major market shifts appear, finally saw an increase in all major indices, with the Nasdaq100 returning to the top of the list, recording a new wave of monthly growth, with +4.3%. Over 2019, index scores are already shining around the world, with an average increase of nearly 20%. The reflection at the beginning of November will now focus on the potential for further growth in the equity markets. As such, the upward trajectory can only be sustained with the maintenance of the three current themes that are promising: stabilizing global growth, easing the political environment and accommodating central bank control.