Monday
January 25
Weekly market update
intro Despite Wall Street's new records, the prospect of a stimulus plan in the U.S. and central banks' accommodative monetary policy, investors are still concerned about the spread of the pandemic. Restrictive measures are tending to increase across the globe, raising fears of a new phase of lockdowns and a worsening economic outlook. Volatility is gradually returning, reflecting renewed nervousness on the part of stakeholders.
Indexes

Over the previous week, the Nikkei continued its ascent, scraping 0.4% over the last five sessions, the Hang Seng won 2.9% and the Shanghai Composite 1.1%.

In Europe, the CAC40 recorded a weekly loss of 1.0% while the Dax gained 0.6%. The Footsie lost 0.7% while the United Kingdom remained confined. For the peripheral countries of the euro zone, Italy fell by 1.3%, Spain lost 2.5% and Portugal 0.4%.

In the U.S., Joe Biden's inauguration, his recently-unveiled $1.9 trillion stimulus package and some good corporate results have supported the trend.The Dow Jones was 0.4% ahead, the S&P500 up 1.7% and the Nasdaq100 up 4.2%.

MSCI Asia Pacific Index

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Commodities

The time is still at a standstill on oil markets, where operators are cautious in the face of the downward revision of the demand outlook due to the resurgence of Covid-19 contaminations. The resumption of oil consumption is expected only from the second half of 2021, which may affect the optimism of some investors. Nevertheless, the price of Brent remains above USD 54.5, against 51.5 for WTI.

A gloomy weekend for precious metals, which were nevertheless much in demand at the beginning of the week, partly due to the weakening of the greenback. The weekly balance sheet remains positive, however, with gold gaining ground at USD 1840, as is silver at USD 25.2.
Metals that are particularly sensitive to energy transition issues also advanced last week. This is the case of copper at USD 8050, nickel, which is now traded above USD 18000, but especially tin, whose price jumped by 5.3% to USD 2650.

Global Commodity Index

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Equities markets

This week, we are putting the spotlight on Somfy. This group, based in the French Alps, has a very high quality stock market performance and has an excellent rating in our screener.

It is an international group present in nearly 60 countries and world leader in the automation of openings and closures in homes and buildings. Present in numerous positions in the value chain (design, manufacturing, marketing), its sales were distributed as follows in 2019: 84% in the Europe, Middle East, Africa zone and nearly 16% in Asia and the Americas.

According to analysts' forecasts, the group should increase its revenues in 2021 and 2022 by 6.7% and 5.7% respectively and maintain an EBITDA margin of 22% for the next two years. The company's self-financing capacity suggests good financial management and resilience in times of uncertainty given the crisis year that has just passed.

The share has performed well, with a 70% increase over the past year on a rolling basis, accumulating more than 318% gains over the last decade, all with limited liquidity, since the average trading volume is around 1 million euros per day.


Strong increase in Somfy share price

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Bond market

European government bond markets have generally followed similar paths, with yields trending upwards. Italian rates came under slight pressure (0.67% for the ten years), with a widening of the spread on the Bund (-0.44%), the driving force being the phase of political instability that persists in Rome. Targeted ECB support for the riskiest bonds in the region, however, helps limit this pressure on transalpine debt.

Still in Europe, the upward trend in yields is also true for the French OAT (-0.22%) and the Mediterranean countries, with Portugal and Spain seeing their rates deviate from symbolic zero (0.12% and 0.08%). France has even seen its loan of 7 billion euros over 50 years at 0.50% oversubscribed more than 10 times.

In the United States, market players are already taking into account a more accommodating US fiscal policy, as evidenced by the increase in Tbond yields (1.1%) and rising inflation expectations.
Forex market

Volatility did not really manifest itself on the currency market despite a very busy news day. After a tentative recovery, the dollar again lost ground against most of the Group of 10 pairs, following Janet Yellen's intervention, who argued that low interest rates offered an opportunity to stimulate the U.S. economy.

The major EUR/USD pair is hovering around the USD 1.2050 line. The greenback's weakness was also evident against the JPY at 103.7 JPY, registering a 600 basis point decline against the Japanese currency in the last 6 months.

The euro retains some resilience against its major counterparts despite the political setbacks in Italy. The room for maneuver is likely to be singularly narrow as Rome faces its worst economic recession since the post-war period.

Currencies linked to raw materials remain on an upward trend, like the loonie (Canadian dollar), all the more so since the Canadian central bank has decided to keep its interest rate constant at 0.25% and to renew its asset repurchases at CAD 4 billion per week.

Across the Channel, the pound is maintaining its bullish trend against the greenback and is trading at 1.37 GBP, a three-year high for cable.
Economic data

The macroeconomic data were generally positive in the different geographical areas.
In China, industrial production exceeded expectations (+7.3%) but retail sales grew by 4.6%, slightly less than expected (consensus 5.5%). Unemployment remained stable at 5.2%.

In the euro zone, few figures were on the agenda. The German Zew index was better than expected at 61.8, as were the European manufacturing and services PMI indices at 54.7 and 45 respectively.

For the United States, the PhillyFed index came out at 26.5 (consensus 11.2), weekly unemployment registrations fell to 900K (926K last week) and building permits and housing starts exceeded expectations, as did the Flash PMI manufacturing and services indexes (59.1 and 57.5).
Markets weaken in the face of uncertainty

In recent sessions, investors seem to be more cautious. Admittedly, the new American president Biden has just launched his gigantic stimulus plan, but the news was already largely integrated into prices.

The index breathing phase is beginning and it comes as no surprise because it was expected by a large majority of the players, who had the opportunity to implement low-cost insurance strategies thanks to a low level of volatility.

Nevertheless, all attempts to retreat could quickly find obstacles, especially since global monetary and fiscal policies are expected to remain stable over the long term.