Financial markets have paused this week, fearing that monetary tightening will continue and that the world economy will enter a recession next year.

While several better-than-expected US statistics (unemployment and ISM services) already raised doubts that the Fed would slow the pace of rate hikes, the new rise in the producer price index reinforces these worries and raise further questions. Next week should therefore be decisive, with the Fed and ECB decisions on rates.
Weekly variations*
DOW JONES INDUST...
33476.46  -2.77%
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NASDAQ 100
11563.33  -3.59%
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FTSE 100
7476.63  -1.05%
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GOLD
1796.83$  -0.12%
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WTI
71.47$  -11.90%
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EURO / US DOLLAR
1.05$  -0.12%
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This week's gainers and losers

Gainers:

Didi Global: The company, which is often portrayed as a Chinese Uber, soared after the relaxation of Covid restrictions in China, which should lead to a recovery in travel. (+45.5%)

U.S. database platform MongoDB jumped this week after reporting better-than-expected quarterly revenue and raising its full-year revenue guidance. (+21.4%)

A U.S. court ruled in favor of Sanofi, GSK and Pfizer in the Zantac litigation. Haleon, as a former subsidiary of GSK, was indirectly concerned. The British pharmaceutical group is up 9.6% this week.

Ferguson (+9.66%): The distributor of plumbing and heating products to professional contractors gained after posting sales growth of 16.6% with 12.7% organic growth on top of strong prior year comparables.

 

Losers:

Electricity producer and distributor NRG Energy plunged. The market remains skeptical about its acquisition of Vivint Smart Home, the smart home specialist, for $5.2 billion, which is considered expensive. (-22%).

Lucid Group (-18.97%) The manufacturer of luxury electric vehicles is down after it said that its order backlog declined in the September quarter.

Lululemon Athletica (-14.82%): Lululemon Athletica released its fourth quarter earnings guidance on Thursday. For the holiday season, revenue and earnings are expected to fall short of analysts' estimates.

VF Corporation, the owner of several well-known brands such as Vans, Timberland, North Face and Eastpak, has warned that demand will be weaker than expected at the end of the year, forcing it to reduce its forecasts. (-13.7%).

Chart Commodities
Commodities
Energy: Despite multiple announcements from Beijing, which is trying to revive its economy, fears of recession have prevailed this week. This weighed on oil prices, since a deterioration in economic activity is necessarily accompanied by a contraction in oil demand. As a result, Brent crude is trading below the USD 80 mark, while the US benchmark is slowly but surely sinking towards the USD 70 mark. this is the price level that corresponds to the White House's range for ordering a replenishment of domestic stocks, which have melted like snow in the sun this year.

Metals: In the base metals space, all roads lead to Beijing. In other words, when the Middle Kingdom is doing better, so are metal prices. In this context, the easing of the national health policy as well as the new support measures for Chinese real estate have boosted the prices of the various metals on the LME. Copper is trading above USD 8,500 per metric ton, nickel is up to USD 31,000 and zinc is accelerating to USD 3,240. In precious metals, gold is holding near its recent highs at USD 1796.

Agricultural products: Despite a drop in the dollar, grain prices were little changed this week in Chicago. Wheat is trading around 740 cents a bushel, compared to 644 cents for corn.
Chart Commodities
Macroeconomics
Atmosphere: Recession is Coming. Recent certainties were too fragile. They did not stand up to contradictory economic signals. The bond market is telling the equity markets that the recession is on its way and that it will be difficult to resist. But the mind of investors is still torn between the fear of a lasting economic slump and the hope that central banks will abandon their punitive policies to avoid damaging growth too much. At the same time, China seems to have finally made a 180-degree turn to revive the country's flagging economy. The authorities are burying the zero-covid policy and supporting the real estate sector. Investors are holding on to this branch a bit as they await a series of monetary policy decisions in Europe and the US next week.

Rates: Despite a disappointing statistic at the end of the week, the PPI (Producer Prices Index) for November was up by +0.3% compared to the previous month against +0.2% expected, expectations of a rate hike of 50 basis points remained almost unchanged at about 75%. However, we will be watching the release of the CPI (Consumer Price Index) next Tuesday, which is expected to decline slightly to +7.3% year-on-year from +7.7% in October. A better than expected reading will certainly be misinterpreted by investors, while a figure in line with or below expectations should boost the ongoing rally in stock market indices. For now, the U.S. 10-year yield is at 3.53% vs. 3.49% last Friday.
 
Currencies: The dollar lost ground against the euro this week, around 1.0534 USD to 1 EUR. The market thought it had a guideline on monetary policy, but nothing is simple this year. Friday's release of higher than expected US producer prices once again cast doubt on whether the Fed will really slow the pace of monetary tightening. Elsewhere, China's easing of health restrictions is helping to keep the USD/CNY pair below CNY7 per USD. The euro lost some ground against the Swiss franc to CHF 0.9844. The MUFG currency volatility indicator is falling back to its long-term average, after a recent turbulent period.

Crypto-currencies: Uncertainty is leading the way in bitcoin this week. Staying steady around $17,000 since Monday, the digital currency is gaining +0.26% at the time of writing. Tiny amplitudes that indicate that crypto-investors do not know what to do after the shockwave caused by the fall of FTX. Without strong positive catalysts, bitcoin, and the cryptocurrency market as a whole, may have a hard time making a definitive recovery from the steep decline it has experienced in recent months. 

Agenda: It's getting crowded at the gate next week. Four major central banks are on deck with monetary policy decisions: the Fed on Wednesday, then the Swiss National Bank, the Bank of England and the European Central Bank on Thursday. But that's not all! We can add to this the German ZEW index and the US inflation for November (Tuesday), the British inflation for November (Wednesday), the US retail sales for November (Thursday) or the flash PMI indices of the major economies in December (Friday). All of which will provide plenty to do before the holiday break.
Historical Chart
Waiting for Jay
All eyes are now on China, the last defense against a recession that seems imminent in the West. The 9% drop in China's annual export growth in November, as well as revolts against the zero-covid policy, have pushed the Chinese government to reopen its economy. Meanwhile, this week's better-than-expected PPI has investors questioning the Fed's policy. Could Fed Chairman Jerome Powell announce a 75-basis point rate hike, instead of the 50-basis points initially expected next week? Everything remains possible. However, the inflation scenario seems to be gradually giving way to a recession scenario as we enter 2023. Good week to all investors.
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*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.