Weekly market update : Fasten your seatbelt

01/21/2022 | 12:14pm

 

In the wake of the fall in US technology stocks and fears of a forthcoming Fed tightening, financial markets have been in a bad way again this week, leading to sell-offs in most sectors. Only the luxury goods sector has regained some color, while banking stocks, which had largely benefited from expectations of a rate hike, are once again suffering from profit taking. Volatility has resurfaced, especially since the first US corporate results have generally disappointed investors.
Weekly variations*
DJ INDUSTRIAL
34645.54  -3.53%
Chart DJ INDUSTRIAL
NASDAQ 100
14686.00  -5.93%
Chart NASDAQ 100
STOXX EUROPE 600
474.44  -1.40%
Chart STOXX EUROPE 600
GOLD
1833.65$  +0.95%
Chart GOLD
WTI
84.91$  +0.54%
Chart WTI
EURO / US DOLLAR
1.13$  -0.56%
Chart EURO / US DOLLAR
This week's gainers and losers
Activision Blizzard (+25%): the video game sector is in turmoil. After the takeover of Zynga by Take-Two, we have Microsoft's friendly takeover bid for Activision, based on a price of around $70 billion.

Peloton Interactive (-22.7%): the debacle continues for the former Covid-proof stock. The specialist in connected indoor bicycles has been receiving more and more bad news. The latest news is a slowdown in production due to lack of demand.

Applied Materials (-17%): the semiconductor sector and its generous valuations is one of the main victims of the ongoing purge on technology stocks.

Burberry (+10.5%): a good week for the British group, whose sales in the fourth quarter of 2021 seduced markets. The performance was helped by the very solid figures published by Compagnie Financière Richemont on the same day. Luxury goods are doing well.

Ubisoft (+15%): The French game publisher is being swept up in the speculation surrounding the takeover of its rival Activision. Ubi is now a small player in the sector.

Siemens Energy (-8%): the stock collapsed on Friday after a severe warning on targets, notably because of Siemens Gamesa.

Sony (-8%): the announcement of the acquisition of Activision by Microsoft raises fears that some of the publisher's flagship titles, such as Call of Duty, will be reserved for the XBox in the future and banned from the Playstation.
Commodities
Oil stabilized this week after reaching levels not seen since 2014. The North Sea benchmark, Brent crude oil, has been close to the USD 90 per barrel line, due to bottlenecks that continue to undermine global supply. The latest event was the explosion of a pipeline in southeastern Turkey, which carries 450,000 barrels per day of crude oil from Iraq to Europe. Freezing weather in Texas, a major U.S. production basin, also raised concerns about U.S. production, with traders keeping in mind that the same conditions had disrupted oil and gas production in the region. However, the increase in U.S. inventories has served to dampen traders' spirits. This increase is certainly modest (+0.5 million barrels) but it puts an end to seven consecutive weeks of decline. Brent crude oil is now trading at USD 86.7 compared to USD 83.8 for WTI.

Industrial metals are maintaining their bullish course thanks to China, which, at odds with the United States and Europe, is reviving its economy with monetary stimuli. This buying pressure is particularly visible in nickel prices, where end users are also dealing with low inventory levels, pushing prices to almost USD 24,000. Aluminum is trading at USD 3100, copper at USD 9900 while tin is now above USD 44,000 per metric ton. In precious metals, the rise in bond yields did not weigh on gold, which gained ground at USD 1,834. The same dynamics were seen in silver, which recovered to USD 24.4.

Regarding agricultural products, grain prices rose overall in Chicago despite the latest monthly report from the USDA, which revised upward its stock estimates for wheat, corn and soybeans.
Chart Commodities
Macroeconomics
The macroeconomic news this week has been dominated by China, apart of course from the permanent backdrop of the promise of a US rate hike this year. In the "Middle Kingdom", fourth-quarter GDP rose by 4%, taking growth in 2021 to 8.1%. A respectable performance, slightly higher than expected, which reassured investors. At the same time, the PBOC, the Chinese central bank, successively lowered four of its key rates, to encourage banks to irrigate the economy. This signal was positively perceived by the market, which sees it as the basis for a pro-recovery policy, at a time when Western economies are engaged in the opposite movement. A re-acceleration of China could be a bullish catalyst for financial markets in need of positive signals. Watch closely.

This week, like last, investors seem to have drowned in the Fed's policy change. The rotation of financial flows in favor of "inflation-compatible" assets continued. Logically enough, we have seen the yield on US debt rise to around 1.8% over 10 years, but without reaching the psychological 2% mark. Real rates are back to -0.5% over 10 years. The German Bund is back at -0.05% after a brief return to bullish territory, while the French OAT is at 0.34%. The Swiss signature is at -0.02% and the Japanese at 0.13%.

The U.S. dollar gained ground against most other major currencies this week, trading at USD 1.13356 to 1 EUR, but failed to move higher. The euro declined to CHF 1.0356. The yen, on the other hand, was little changed against the dollar, still trading around JPY 114 to the USD. "The dollar failed to extend its strength, but it remains sufficiently firm and there is no indication that investors intend to explore weakness again, also given its role as the preferred safe haven currency as risk aversion resumes," according to Unicredit.

In the wake of Wall Street, the cryptocurrency market continues to sink, moving further away from its historical highs every day. At this rate we will soon have halved the record of $3 trillion in total market capitalization reached only 2 months earlier. At the time of writing, the market weighs "only" 1800 billion. A bitcoin down almost -10% over a week, which has the effect of sowing (even more) fear among crypto-investors. Where will the fall of the digital currency, which started more than two months ago, end? The next few weeks are shaping up to be exciting for the cryptosphere.

Next week, the PMI indicators return on Monday for the preliminary versions (we're talking Flash PMI) of January. Remember that these indicators are very closely followed because they take the pulse of the purchasing managers of companies in each major economy. There will also be the German Ifo business confidence index on Tuesday and, above all, the major American triplet: the Fed's rate decision on Wednesday, preliminary Q4 GDP on Thursday and PCE inflation on Friday.
Historical Chart
Fasten your seatbelt
The prospect of a rate hike in the United States continues to cause unrest. This is reflected in the sectoral and geographic rotation of equity markets. The negative effect is exacerbated by the sell-off in technology stocks, which is weighing heavily on Wall Street. This cocktail of rising US interest rates and investors moving away from tech stocks is increasing the gap between the US stock market and the rest of the world. Next week, the focus will be on the U.S. central bank meeting and the increasing number of corporate results.
Things to read this week
Will the first metaverse be Chinese? Will the first metaverse be Chinese?
A contraction of the words "meta" or augmented reality. It is about extending our reality into shared virtual spaces, which are modeled in a 3D environment.... Read more
Nasdaq extends declines to fourth day on Netflix letdown Nasdaq extends declines to fourth day on Netflix letdown
Netflix Inc plunged 22.7% after the streaming giant fell short of market forecast for new subscribers at the end... Read more
Graphic: Five ways the U.S. housing market stood apart in 2021 Graphic: Five ways the U.S. housing market stood apart in 2021
Here are five standout facts from the 2021 housing market: Graphic: Existing home sales hit 15-year... Read more
*The weekly movements of indexes and stocks displayed on the dashboard are related to the period ranging from the open on Monday to the sending time of this newsletter on Friday.
The weekly movements of commodities, precious metals and currencies displayed on the dashboard are related to a 7-day rolling period from Friday to Friday, until the sending time of this newsletter. These assets continue to quote on weekends.
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