Weekly market update : Opposing views

Financial markets were once again volatile this week, initially reacting to the Fed chairman's tougher speech, before ending the week on a high note, on the backdrop of hopes for an easing of health restrictions in China. After two sessions of sharp declines, risk appetite abruptly resurfaced on Friday, allowing Europe to finish at its highest level since late August. As for US markets, they remained in negative territory for the week, impacted by technology stocks. However, Friday data showing that the unemployment rate grew more than expected in America boosted hopes that the Fed will ease its rate hikes from December.

Weekly variations* US 500 3770  -3.35% ABIOMED, INC. +44.92% WYNN RESORTS, LIMITE... +21.46% HOLOGIC, INC. +12.40% FIDELITY NATIONAL IN... -29.13% CATALENT, INC. -35.86% LINCOLN NATIONAL COR... -36.29% DOW JONES INDUST... 32403.22  -1.40% NASDAQ 100 10857.03  -5.97% FTSE 100 7334.84  +4.07% GOLD 1680.20$  +2.26% WTI 92.44$  +4.61% EURO / US DOLLAR 1.00$  +0.04%

This week's gainers and losers

Gainers: Abiomed (+45%): Johnson & Johnson will buy the cardiac device maker for $16.6 billion, or $380 per share, plus a potential $35 per share earn-out based on the achievement of certain development milestones. Ocado (+33%): The British company's shares soared this week on the announcement of a deal with South Korea's Lotte Shopping Group, which it will help expand its nationwide distribution network with its technology solutions. First Solar (+19%): The stock benefited from a buoyant recommendation from BofA Securities, which raised its price target from USD 138 to USD 165.   Losers: Rogers (-54%): The stock plummeted after DuPont announced it was terminating its proposed buyout because the companies were unable to obtain all required regulatory approvals in a timely manner. DuPont will pay $162.5 million in compensation to Rogers, which is not enough to cheer up investors. Twilio (-43%): The U.S. technology company reported a quarterly loss. The descent into hell continues for a stock divided by ten since its highs. Atlassian (-37%): Again, poor quarterly results precipitated the stock's fall. Fidelity National Information (-33%): Disappointments are not forgiven in the market today. The American group published results slightly below expectations and paid the price. Zoominfo (-31%): Investors are also punishing the company pay for disappointing them. While quarterly results were decent, annual guidance was revised downward. Airbnb (-20%): Third-quarter results disappointed investors, who heavily punished the stock on Wednesday. BT Group (-9%): The British telecom operator will have to raise prices to cope with inflation and strengthen its economics.

Commodities

Energy: China is reportedly considering easing its zero Covid policy, a prospect that cheered oil markets as it implies an increase in oil demand. On the supply side, the consequences of European sanctions on Russian oil, which will come into effect on December 5 for crude oil and February 5, 2023 for refined products, are still unknown. As a result, oil prices recovered to USD 97 for North Sea Brent and USD 91 for US WTI. Speaking of the United States, the U.S. Energy Agency (EIA) revealed in its latest monthly report that U.S. production is around 11.975 million barrels per day, a level not seen since March 2020 and the coronavirus crisis. Metals: The firmness of the Federal Reserve and the strengthening of the US dollar weighed on the industrial metals segment this week. Zinc hit a new annual low on the LME at USD 2,680 per tonne, still hampered by a difficult recovery in China, where smelters are slowing down. The barometer of the global economy, copper, is trading near USD 7500. In precious metals, gold has recovered a little to USD 1,650. The barbaric relic has returned to the spotlight thanks to the latest report from the World Gold Council, which shows that central banks amassed a large amount of gold during the third quarter. Nearly 400 tons of gold were purchased, mainly by the central banks of Turkey, Uzbekistan, India but also Qatar, which are looking to diversify their foreign exchange reserves. Agricultural products: Russia is blowing hot and cold on grain prices in Chicago. After having given up on the agreement on Ukrainian exports to the Black Sea, Moscow finally changed its mind after obtaining certain guarantees that Ukraine would not use the maritime corridor for military purposes. In terms of prices, wheat and corn are trading at 850 and 680 cents per bushel, respectively.

Macroeconomics

Atmosphere: Roller Coaster. On Wednesday, the U.S. central bank seemed to pave the way for a slightly less restrictive policy in the future, after raising its rates by 75 basis points. But statements by the Fed boss right after the announcement cooled investors. Jerome Powell indicated that the peak of the rate cycle envisaged by the market was probably a bit low. The equity markets then fell heavily. But on Friday, a slight rise in the US unemployment rate rekindled the flame of hope: after all, if the overheating of the labor market starts to cool down, the central bank might not need to be so punitive, who knows? As you can see, we are still in the realm of epidermal reactions. The end-of-week rebound was exacerbated by rumors of an upcoming change in Chinese zero-covid policy.   Yields: Yields remained on the upswing this week, after the aforementioned statements by Jerome Powell. Derivatives show that the market expects a rate peak of 5.25% for the Fed next year. The 10-year maturity of U.S. debt is paying 4.12% (3.98% a week earlier). The yield curve remains inverted relative to short maturities, so the market still fears a recession. Elsewhere in the world, the Bund rose to 2.27% and the OAT to 2.80%. Gilts confirmed their return to calmer waters, around 3.53%. The most expensive debts in the region remain those of Italy (4.44%) and Greece (4.65%).   Currencies: It was a difficult week for the British pound, despite a new 75 basis point tightening by the Bank of England. The euro rose to GBP 0.8749 and the dollar to GBP 0.8923, gains of around 2% for the week. As for the euro-dollar pair, the single currency slid for four days before recovering strongly on Friday, after the release of the US unemployment rate increase, to return to USD 0.9924 .   Cryptocurrencies: This week, bitcoin held up better than US stock indexes by being slightly in the positive around USD 21,000 at the time of writing. On the other hand, it is still far from being out of the woods, even if the rebound started last week has given some optimism to crypto-investors. The digital currency is still gravitating not far from its yearly lows and is operating in a macroeconomic environment that is still fragile for risky assets. Bitcoin may take a while to recover as it plays with the nerves of crypto ecosystem aficionados in the coming weeks.  Calendar: Two big events next week for financial markets. First, the US midterm elections on Tuesday, November 8. Then the October US inflation figures, unveiled on Thursday. Canada and the United States will switch to daylight saving time over the weekend, which will restore the traditional time difference. There will be a holiday on November 11.

Opposing views While the Fed reiterated its primary intention to reduce inflation by raising its key interest rates, the markets have had a series of up and down sessions, with bad news pushing indexes up and good news pushing them down. The world is upside down... Well, maybe not: the market seems to be clinging to the narrative that if the economy is losing momentum, then the Fed will come to its rescue. However, Fed Chairman Jerome Powell has been consistently pushing the opposite narrative, with the primary objective of lowering inflation. This implies that even if the economy goes into recession, he will continue to raise rates.

Things to read this week

T-Mobile US : A telecom company like no other The business model of American telecom operators is exactly the same as that of their European counterparts. Yet the capitalizations of European telecom groups... Read more Currencies: Focus on Foreign Exchange Reserves . Who Owns U.S. Debt? You've probably already read or heard that China "owns" the United States by holding a considerable amount of its government debt.... Read more Twitter buyout: What it means for the crypto industry Here are some potential crypto developments that Twitter can initiate with a little help from its new friend – crypto exchange giant... 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.