|Weekly market update|
|The disappointing macroeconomic data from China, the setbacks of China Evergrande, the mixed data in the US and the spread of the Delta variant are gradually accentuating the lack of visibility. These uncertainties have led to erratic movements on markets this week, but the overall picture appears negative for many indexes.
Over the past week, in Asia, the Nikkei took a breather (+0.4%), after having gained nearly 10% over the previous two weeks. The Hang Seng lost 5% and the Shanghai Composite 2.4%.
In Europe, the CAC40 lost 1.40% over the last five days, the Footsie lost 1.21% and the Dax lost 0.77%. For the peripheral countries of the euro zone, Italy is up 0.09%, Spain 0.75% and Portugal is down 0.71%.
At the time of writing this weekly update, in the United States, the Dow Jones recorded a weekly loss of 0.5%, the S&P500 0.6% and the Nasdaq100 lost 0.5%.
It was a turbulent week for commodities in the broadest sense. First, the energy market woke up, pushing Brent above USD 76 and WTI around USD 73. While both benchmarks have since consolidated, this might change again soon, since US oil inventories took an unexpected nose dive. This is not unrelated to the sudden surge in electricity prices in Europe, fueled by low Russian gas production. Investors have been watching closely since several manufacturers, including BASF, warned that this would not be without consequences for their results.
Gold has suffered from the strengthening dollar, losing more than 2% in less than a week, a significant change in this market. The ounce is trading at USD 1765, up from just over USD 1800 on Tuesday. Silver took the same punishment, falling from USD 23.84 to USD 22.90 per ounce.
Industrial metals had a rather neutral week on the surface, but some compartments suffered, such as iron ore prices. Beijing is said to be considering tightening its regulations on environmental obligations, while entire regions are not meeting their commitments. These announcements have weighed on electro-intensive industries, such as steelmakers, raising fears of lower than expected demand. Palladium suffered again at the beginning of the week, before recovering modestly thereafter.
The rise of natural gas prices is clearly visible
Buoyed by Covid restrictions, fintechs are on a roll. Affirm Holdings, Inc. reveals a 71% increase in quarterly revenues. This year, it doubled its number of clients. Its share soared 27.7% over the week.
The deferred payment specialist provided earnings guidance and expects sales of $240 million to $250 million in Q1 2022, while for the full year 2022, it expects sales of between $1,160 million and $1,190 million.
In the wake of its partnership with Apple, the US fintech announced a partnership with Amazon a few days ago to allow customers to pay for their purchases in installments.
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.
Affirm is having a good year so far
The dip between second and third quarter corporate earnings brought macroeconomics back into the spotlight. The latest statistics have caused quite a stir. On the one hand, China's economy is slipping. The PMI indicators published earlier had already made this clear. The publication of retail sales well below forecasts for August confirmed this. By multiplying coercive measures against companies that stray too far from the party line, Beijing is causing damage to its own economy. At the same time, the financial debacle of the developer China Evergrande is worrying global markets and pushing up the local risk premium. On the other hand, the United States produced robust statistics this week, whereas previous indicators were pointing to a slowdown. Inflation is lower than expected, consumption is more dynamic and the industrial outlook is solid. This is enough to further confuse the issue with less than a week to go before the Fed's re-opening meeting.
The unexpected series of positive indicators in the US benefited the dollar this week. It has put a new twist on the euro, which is falling below USD 1.18. In the sovereign debt market, European rates are trending higher. On Thursday, the Financial Times revealed that the European Central Bank's non-public models were pointing to a faster-than-expected rate hike in the Eurozone. This information was quickly denied by the ECB, but it caused European debt yields to shift slightly. The Bund thus rose to -0.29%, its highest level since mid-July, and the OAT to +0.04%. The yield on British GITS (0.82%) remains above that of Greece (0.78%) and Italian BTP (0.73%).
On the agenda next week, a Fed meeting (verdict on Wednesday 22), as well as the September Flash PMI indicators for the major economies (Thursday 23) and the Ifo business sentiment index in Germany (Friday 24).
|FOMC decision looms
The Nikkei rallies, the Hang Seng falls, the Stoxx stabilizes in the wake of its American big brother, the S&P 500. The dichotomy of forces tugging at the world's indices is gradually being felt as the date of the next Fed conference draws closer. The big event of the fall, next Wednesday to be exact, will be the decision by the FOMC, the Federal Open Market Committee, to raise (or not) rates and reduce (or not) asset purchases. Renewed growth could lead to a less accommodative monetary policy than at present, a decision that could potentially constrain market participants but that would be a sign of a stronger economy. It remains to be seen what role the Fed wants to continue playing.