Weekly market update : November's frost does not freeze prices

11/12/2021 | 12:20pm
Friday
November 12
Weekly market update
intro On the back of good corporate results, European stock markets have just completed another week of gains, setting new annual or historic records. Meanwhile, Wall Street was mixed. Risk appetite is still present for the time being, despite inflationary fears that could push central banks to prematurely reduce their monetary support. Europe's new Covid wave is also cause for concern.
Indexes

Over the past week, indexes have evolved in a scattered order and it is New York that signs the worst performance.

Asia recovered, the Shanghai Composite recovered 2.5%, the Hang Seng 2.45% while the Nikkei gave up 0.40%.

In Europe, the CAC40 recorded a weekly performance of 1.2%, the Dax gained 0.4% and the Footsie 0.6%. For the peripheral countries of the euro zone, Spain consolidated and lost 0.8%, Italy lost 0.5% while Portugal recovered 1.8%.

Across the Atlantic, inflationary fears and the rise of the dollar have weighed somewhat on the trend. The Dow Jones and the S&P500 lost respectively 0.7% and 0.4% over the last five days and the Nasdaq 100 1.1%.



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Commodities

In the absence of bullish catalysts, oil prices have stalled this week. OPEC also lowered its estimate for oil demand growth this year, with the cartel pointing to a more feverish recovery in China and India. Traders are also closely watching the Biden administration's statements as the U.S. may tap into its strategic reserves to push prices lower. Brent crude is trading around USD 82, compared to USD 80.7 for a barrel of WTI.

Gold holders can smile again. The ounce of gold has finally broken free from the USD 1720-1830 area where it was locked since June. The US consumer price figures were a shock, boosting the price of the barbaric relic, which is seen as a hedge against inflation. Gold is now trading around USD 1,855 while silver is above USD 25. Industrial metals have also rallied. Base metal production continues to be impacted by electricity rationing in some parts of China, pushing prices higher. A ton of copper is therefore trading at around USD 9850, nickel is climbing to USD 19800, as is aluminum at USD 2645.
In agricultural commodities, wheat hit a new annual high, breaking through 800 cents per bushel in Chicago.
Equity markets

Electric cars: Tesla's shareholders have been subjected to a new prank by Elon Musk, who put his intention to sell 10% of his shares in the manufacturer to the poll. Shortly after a positive vote - which made the stock lose 15% in two sessions - the leader has effectively sold for $ 5 billion of shares. To comply with the survey, other sales are planned. In the same sector, Rivian has successfully completed its IPO. Two days after the IPO, the company was worth $105 billion... almost as much as Daimler, which has sold more vehicles in 30 minutes than Rivian since the company was founded.

Johnson Matthey: the specialist in fine chemicals and precious metals for advanced applications took everyone by surprise when it announced the sale of its battery business, due to impossible competition. As a result, the company's "electric vehicle" premium has melted away and the stock has lost 19% in a single session.

Sika: the share has recovered 10% in one week after announcing the purchase of MBCC, a former subsidiary of BASF. The 5.5 billion Swiss francs price tag did not scare off investors, who are confident that the Swiss group will succeed in the integration. It is the biggest acquisition in Sika's history.

Beyond Meat: the American producer of vegetarian steaks published yet another disappointing result, which earned it a brutal 20% drop for the week. When you are generously valued, being fashionable is not always enough to keep a stock afloat: results must follow.



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Macroeconomics

Wednesday, November 10 was circled in red on the calendar of investors, who were waiting for the release of the US inflation figures for October. Overheating prices remain the main concern of investors, who fear more than anything that central banks will have to turn off the liquidity tap to counter a slippage that is too damaging for economic agents. As in previous months, inflation in the United States exceeded expectations with prices rising by 0.9% over one month and 6.2% over one year. The market saw this as one more complication for the Fed to deal with, although the negative reaction in indexes was short-lived. The issue has not really changed: the US central bank, like its international counterparts, has to find the optimum between irrigating the economy, controlling overheating and the need to reduce exceptional support programs.

For the time being, the monetary response is shifting and is not upsetting the equity markets too much. Neither are bond markets, although the rate hike schedule could accelerate. The US government bond is paying 1.56% over 10 years and the German Bund -0.25% over the same period. We therefore remain very close to the levels of the previous week.

On the currency side, the dollar continued its rise. It rose to USD 1.1447 for EUR 1. The movement was fueled at the end of the week by new tensions on the eastern borders of Europe, between the EU and Belarus on the one hand and between Russia and Ukraine on the other. The greenback also regained ground against the British pound, at GBP 0.747099 per USD 1.

On the cryptocurrency side, the market episodically peaked above $3 trillion this week, before quickly falling back below that threshold. Bitcoin is holding above $60,000 with historically favorable seasonality for it at the end of the year.

Next week, it's October's US retail sales that will hog the limelight on Tuesday. There will also be quite a few public speeches by central bankers in Europe and the US.



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November's frost does not freeze prices

In November, the reduction of asset purchases would normally take center stage. Inflation in the U.S. is not something we want to forget anytime soon. With CPI reaching all-time highs, we are reminded that a reduction in central bank liquidity is imminent. These numbers, along with more mixed results than usual, have pushed U.S. indexes down a few points. But as long as a rate hike is not on the agenda, there is no need to worry about equity markets.
© MarketScreener.com 2021
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