|Weekly market update|
|Financial markets suffered a sudden return to risk aversion this week, as traders abruptly sold risky assets following US statistics at half-mast, which confirmed in particular the contraction in manufacturing activity for the second month in a row. The employment data have not shed any more light and should therefore reinforce the indecision already observed among market participants.|
Over the past week, all the major indices have largely corrected.
In Asia, the Shanghai Composite lost only 0.9% on Monday alone, with Chinese markets closed until October 8. The Hang Seng lost 1.25% and the Nikkei 1.59%.
In Europe, losses are very significant. The CAC40 fell by 2.80%, the Dax by 2.4% and the Footsie by 4% as Brexit approaches. For the peripheral countries of the euro zone, Portugal, Spain and Italy lost 0.4%, 2.6% and 2.5% respectively.
In the United States, the Dow Jones recorded a weekly loss of more than 2 %, while indices more oriented towards new technologies showed strong resilience, as did the Nasdaq 100 (-0.2%).
Oil prices are slowing over the week, weighed down by an increasingly turbulent global economic situation. Fears over demand therefore outweigh the reduction in OPEC's supply, whose production has fallen to its lowest level since 2011. Operators are also closely monitoring the Venezuelan case, which aims to double its oil production by 2020. In this context, oil references overlap with major daily supports, at USD 57 for Brent and USD 53 for WTI.
Intensifying concerns about the health of the global economy are benefiting the gold ounce, which is back above the USD 1,500 mark. The money does not follow the same trajectory and stands still at USD 17.5.
Pending a resumption of Sino-American trade negotiations, the hard commodities segment is falling back. Copper, aluminum and zinc are losing ground while lead and tin are stabilizing. The exception is nickel, which rose by 2.1% to USD 17785 per metric tonne.
Among the Bel 20 stocks, Barco (2.1 billion euros of capitalization) stands out in terms of performance, to position itself in first place. This exemplary track record comes essentially from an exceptional first half of the year. The share went from EUR 99 at the beginning of the year to EUR 185 at the end of June. Since then, a consolidation scheme has been put in place but the increase remains at 78%.
Barco, founded in 1934 by Lucien de Puydt, is named after an acronym: Belgian American Radio COrporation. At the time, the company was assembling radio receivers from American parts to produce the first televisions in its country a few years later.
Today, the Belgian company offers high-end visualization solutions for the cinema, entertainment, business and medical sectors.
The company generated sales of €496 million in the first half of the year, with an EBITDA of €67.6 million and a net income of €43.1 million.
The stock market has therefore praised its earnings power over the past three years (+220%) thanks to the improvement in its costs coupled with its strategy to penetrate more and more markets.
Rise of the Barco share
Yields on 10-year bonds are falling again, reaching weekly lows as a result of tensions over the slowdown in growth. The Tbond is traded at 1.52%, leading to a drop in the greenback.
In Europe, the downward trends in references are becoming widespread in all countries. While the German bund (-0.45%) and the French OAT (-0.30%) are approaching their historical thresholds, Spanish (0.11%), Italian (0.97%) and especially Greek (1.3%) debts are trading at historically low levels.
Despite a pause in the upward trend of the Swiss franc, Swiss sovereign borrowing is trading close to its historical zone, with a rate of -0.84%.
Sovereign bond yields at their lowest point of the week (blue dots)
Volatility remains low in the currency segment, with arbitrage being less pronounced among traders than among equity investors.
Among the downward underlyings, the Swiss franc, once again, is losing ground against its major counterparts due to poor national statistics. The Swiss currency lost more than 100 basis points against the euro at CHF 1,095 and against the dollar, with an exchange rate at parity.
The greenback is also under the same selling pressure, after US activity figures and expectations of a further decline in FED rates. The EUR/USD parity logically resumes a little height at 1,099 USD.
In Europe, the British pound stabilized despite the countdown of the Brexit, at GBP 1.23 against the greenback and GBP 0.89 against the single currency.
For its part, the yen, a safe haven currency in periods of market stress, rose against the euro to JPY 117.5 and against the dollar to JPY 106.8.
Economic indicators continue to decline in Europe. The eurozone manufacturing PMI stood at 45.7 (slightly above the consensus at 45.6) while it deteriorated more than expected in France, Italy and Spain.
In the United States, the fall in the ISM indices had the effect of an electroshock on the markets. In addition to the sharp deterioration in manufacturing ISM, which fell to 47.8 (compared to a consensus of 50.4), there was also a decline in services ISM, which showed signs of weakness at 52.6 (compared to a consensus of 55.1). Non-agricultural job creation recorded the same negative dynamic, falling to 136K (versus a consensus of 145K) while the unemployment rate remained at a level of full employment (3.5%).
The industrial recession is visible over the last two months
| Bad news is good news
An insight into the FED's recent action, which raised questions, has just taken place this week with the alteration of the activity indices, published by the Institute for Supply Management (ISM). The recession will therefore be the focus of operators, with the possible contagion of the deterioration of the industrial sector on services, the main support of the modern economy, a contagion that could put an end to the fabulous cycle of economic growth underway.
The vitality of consumption will therefore be the last bulwark to prevent growth from stopping. This will require stable employment despite the decline in business.
The US central bank will remain vigilant for any deterioration in economic aggregates to intensify its accommodative tone and boost the real economy.