Weekly market update : Central banks remain at the center of the game

09/03/2021 | 11:47am
Friday
September  3
Weekly market update
intro What will the Fed do at its next meeting, when the unemployment rate is at its lowest since April 2020, but job creation is well below expectations (235K vs. 720K)? The major indexes are digesting these figures for the time being, but weekly gains are gradually shrinking in Europe, indicating a certain chilliness among market participants. Volatility can resurface at any time.
Indexes

Over the past week, Asia has been doing well and continues to catch up. The Nikkei posted the best weekly performance (+5.4%). The Hang Seng gained 2% and the Shanghai composite 1.7%.

In Europe, it's finally a week for nothing. The CAC40 gained 0.15% over the last five days, the Footsie lost 0.2% and the Dax 0.7%. As for the peripheral countries of the euro zone, Portugal is alone, with a gain of 2.8%. Italy is stable and Spain is down 0.6%.

At the time of writing, U.S. indices are losing ground after a succession of records. The Dow Jones is down 0.4% for the week, the S&P500 is still down 0.5% but the Nasdaq100 is up 1.3%.

MSCI

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Commodities

The outcome of the latest OPEC+ meeting left no room for suspense since, as expected, the enlarged cartel decided to continue its gradual increase in production, which will rise by nearly 400,000 barrels per day from October. The organization has not failed its reputation by showing great caution in its projections due to uncertainties related to the pandemic. The consequences of Hurricane Ida on US production are also on investors' mind. Nearly 80% of Gulf of Mexico production was disrupted by the hurricane. Brent crude is trading at USD 73 per barrel while WTI is back above USD 70.

Gold is once again hitting a wall, the USD 1,830 mark, which has been blocking buying assaults until now. The barbarian relic is back on a bullish trajectory, helped by a weaker dollar and mixed US employment figures. Silver is also regaining some height at USD 24.2 per ounce. As for base metals, weekly developments are rather disparate. As proof of this, aluminum is up to USD 2700, copper is stabilizing at USD 9300, while lead is slowly slipping below USD 2400.

As for agricultural commodities, corn fell once again in Chicago, with similar dynamics for wheat and soybeans.

Mixed paths

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Equity markets

Top gainers this week include Affirm Holdings. In the wake of its partnership with Apple, the US fintech announced a partnership with Amazon to allow customers to pay for their purchases in installments. It surged 41.4% this week.

Launched in 2012 by PayPal co-founder Max Levchin, it entered the Nasdaq in January this year. Specialized in fractional payments, the company is known for its "buy now, pay later" option.

A service that has been particularly appealing during the pandemic, as consumers favored online purchases. The company multiplied partnerships, with big retailers.

Its revenue soared 93% to $509.5 million in its fiscal year ended last June, and is expected to jump 64% to $834.5 million this year.



Affirm's rise

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Macroeconomics

There was something for everyone this week on the "macro" agenda. First, PMI indicators confirmed that major economies are not all at exactly the same stage of the cycle. China is starting to see its momentum fade, especially since Beijing is not being kind to its own companies at the moment, while the post-covid peak in activity seems to have passed in the US.

Europe is a bit in between, with indicators still showing strong expansion, but slightly down from recent highs. Second, OPEC held a meeting that sounded like a non-event. Finally, central banks were vocal, with the debate on the reduction of monetary support plans gaining momentum, in the US of course, but more unexpectedly in Europe as well.

To top it all off, markets were eagerly awaiting the announcement, on Friday afternoon, of employment figures in the United States, as a barometer of the pace of the Fed's tapering. Job creation was much lower than expected, but the unemployment rate fell to 5.2%. This is a reason to remain skeptical, as the main scenarios have been foiled. Investors may see this as a sign that the Fed is going to wait a little longer... or that the US economy continues to disappoint. It will take some time to digest the significance of the announcement.

The sovereign debt and foreign exchange markets moved a bit. Comments from several ECB central bankers in favor of reducing the bank's "covenants" strengthened the euro against the dollar and pushed the Bund rate back up to around -0.39%. The French OAT came back close to balance (-0.03%). At the end of last week, the 10-year debt of the two largest economies in the euro zone stood at -0.42% and -0.06% respectively. The 10-year T-Bond remains close to 1.3%. At the end of the week, the EUR/USD climbed back to within reach of USD 1.19. In Asia, the scheduled resignation of Japanese Prime Minister Yoshihide Suga did not cause any trouble on stock markets, with USD/YEN virtually unchanged at USD 109.93.

Euro/dollar parity over the last 3 months

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Central banks remain at the center of the game

It was another week of ups and downs for equity markets, which did not prevent US indices from reaching new highs. The mixed US job data in August does not really offer additional clues on the path of monetary policy. The European Central Bank meeting scheduled for next Thursday could provide some more info on European intentions. More than ever, central banks are in the driver's seat.
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