Monday
April 15
Weekly market update
intro Despite well-received corporate results, the postponement of the Brexit to October 31 and very accommodating comments from the central banks (Fed and ECB), the financial markets have evolved in a dispersed order this week, after setting new annual records. Banks recovered to the weekly sequence while more defensive stocks experienced declines, proving that risk aversion remains non-existent.
 
Indexes

Over the past week, the financial markets recorded a positive performance, with the exception of Asia, which suffered some profit taking.

This time, China recorded the strongest decline, with -1.8%, but still posting the best performance since January 1 (+27.9%). The Hang Seng lost 0.46% and the Nikkei 0.3%.

In the United States, at the time of writing this weekly point, the Dow Jones lost 0.3%, the S&P500 gained 0.3% and the Nasdaq100 gained 0.6%.

In Europe, the CAC40 gained 0.4%, the Dax was stable and the Footsie dropped 0.35%, after the Brexit was postponed. For the peripheral countries of the euro zone, Portugal gained 1.3% while Spain fell by 0.6%.

Violent rebound of the Chinese index

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Commodities

Despite the IEA's concerns about the level of oil prices, which could destroy demand, Brent and WTI prices rose over the week, once again at the highest annual levels. The effects of OPEC+ cuts continue, accentuated by the further decline in Venezuelan production. In the shorter term, the market is closely monitoring armed clashes in Libya, which could disrupt the country's supply. In this context, Brent is trading around USD 71.6 while WTI remains above USD 64.

Despite a risk appetite that remains intact, precious metals stabilized over the week, largely due to a weakening of the greenback. As such, gold and silver are traded around USD 1295 and USD 15.06 per ounce respectively.

The consolidation phase is continuing in the industrial metals sector, such as copper, nickel and aluminium, whose prices fluctuate horizontally. Only zinc benefits from an upward trend as it approaches the USD 3000 per metric tonne zone.
Equities markets

Vestas Wind Systems is the number one in wind turbine design. The Danish group has made a spectacular recovery in recent years and has thus returned to profitability.

The green energy specialist is enjoying moderate but steady growth in a promising niche market. Thus, it offers a more defensive profile. Vestas has a qualitative Surperformance rating, particularly in terms of financial strength, valuation and momentum. Its turnover forecasts are rising sharply, ranking it among the best in the world on this fundamental criterion.

The fundamental performances are reflected in the recent upward trend of the share, approaching its historical high of DKK 645 in August 2008. Integrated into the OMX 20 in Copenhagen, Vestas Wind Systems capitalizes $18.5 billion and makes one of the most dynamic advances within the index (+20% over 2019).

Return of the Vestas share to its historical highs

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The Danish action is making dynamic progress, validated by a recent pull-back (A).
Bond market

After yet another set of dovish speeches by central banks, the sovereign bond market commonly shows low yields. In the United States, first of all, where the 10-year period is traded on a 2.49% basis.

This movement is being replicated in Germany, a country that is experiencing an industrial recession. The Bund thus symbolically returns to below "zero". The French OAT takes advantage of this euphoria on government bond purchases to trade on a 0.32% basis. The same is true for the Spanish reference (1%).

In contrast, in Italy (+8 basis points to 2.51%) and the United Kingdom (+5 basis points to 1.13%), investors are becoming more demanding on debt yield.

Outside the euro zone, Switzerland (-0.33%) and Japan (-0.06%) benefit from exceptional debt conditions, confirmed by the strength of their currencies.
Forex market

Despite the postponement of Brexit for 6 months, the British pound remains within narrow ranges, trading at JPY 146 and USD 1.31. The euro recovered against the yen (+200 basis points to JPY 126.2), against the Swiss franc (CHF 1.13) and against the dollar at USD 1.1290.

The greenback gained some ground against the Japanese currency at JPY 111.8 but fell against the euro. The single currency is temporarily benefiting from the European decision on the carry-over with the United Kingdom (USD 1,132).

The Australian dollar, which is highly dependent on the Chinese economy, is showing a graphic resistance on the yen at JPY 79.72 while the Indian rupee is suffering from the decline in the national central bank's rates (-100 basis points against the dollar at INR 69.30).
Economic data

In the euro zone, the Sentix consumer confidence index recovered in April (-0.3% against -2.2% in March). Industrial production fell less than expected in February to -0.2% (consensus -0.5%). Last Wednesday, the ECB decided to leave the level of its key interest rates unchanged, at 0.00% for the refi rate, 0.25% for the marginal lending facility and -0.40% for deposit remuneration.

This week, we will look at the ZEW index of German economic sentiment, consumer prices and flash indices of manufacturing and service industries.

Last week in the United States, the consumer price index rose (but not the core version), as did producer prices. Orders to industry came out as expected, down 0.5%. Oil stocks stand at 7 million barrels (consensus 2.6M) and unemployment registrations fall to their lowest level since 1969 (see graph).

The Fed will publish its Beige Book on Wednesday. Before that, investors will be informed about the New York Fed Manufacturing Index and industrial production. Then, will be released, weekly crude oil inventories, retail sales, PhillyFed index, weekly unemployment claims, and finally building permits.


Evolution of weekly registrations for US unemployment

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Exceptional journey but exceptional expectations

In the equity markets, the upward trend remains strong. No corrective movement, no volatility shock, the scenario benefits buyers intensely. The air gap suffered in the fourth quarter of 2018 (-18% on the CAC40) has just been erased by a 20% rebound in Parisian equities. This catch-up configuration is verified on all indices. The IMF's downward revision of world growth to 3.3% for 2019 should give way to a phase of re-acceleration to +3.6% for 2020, which partly explains the good performance of the indices.

The latter is based on high expectations (symbolic trade agreement, flexible Brexit, accommodating monetary conditions). Nevertheless, the components of this exceptional movement are defined both by more or less strong convictions and by a self-realizing market structure, where the rise calls for an increase, due to the managers' obligation to be invested as graphic thresholds are crossed.

The slightest disappointment on expectations could nevertheless be a pretext for consolidation and an increase in volatility. The temporal phase that is opening up, therefore, promises to be indecisive but exciting.