Friday
July 16
Weekly market update
intro It was a busy week for markets, which were overwhelmed by macroeconomic indicators and the first half-year results. The nagging issue of inflation returned to the forefront, but concerns were quickly dispelled thanks to Jerome Powell's intervention, which reiterated that the rise in prices will be temporary. The Federal Reserve is not ready to cut its support.

Indexes

Indexes remain generally well oriented but seem to lack catalysts to continue their ascent. As a result, weekly variations remained narrow across the globe, with the exception of the Hang Seng, which rebounded vigorously by 2.7% in five sessions.

Elsewhere in Asia, the Nikkei remained relatively stable as the Japanese index only gained 0.22% over the week to 28,000 points.

US indices have reached new highs. At the time of writing, however, the S&P500 and Nasdaq100 are poised to end the week on a stable note, while the Dow Jones is up 0.3%.

In Europe, it is time for consolidation. The French CAC40 lost 0.5% while its Swiss and German counterparts posted weekly scores of almost zero. Concerning the peripheral countries of the euro zone, Spain and Portugal are somewhat behind, with respective declines of 2.2% and 0.9%.
Commodities

OPEC+ crystallizes all tensions within oil markets, which are heading towards a new bearish weekly sequence. The uncertainty surrounding talks, or rather the impossibility for members of the cartel to find a consensus on the evolution of production weighs on prices. The risk of a production war raises fears of a March 2020 scenario, when Saudi Arabia decided unilaterally to increase its production following the failure of discussions with Russia. WTI is trading around USD 71.5, while Brent is trading above USD 73.

Gold is recovering thanks to the easing of bond yields and especially real rates which are sinking into negative territory by the day. The real yield on U.S. T-Bonds is around -0.4% today, compared to 0.0% last April. It will cost USD 1820 for an ounce of gold, while silver prices continue to move flat at USD 26.

Industrial metals remain well oriented, supported by good performance indicators in China. Tin was a clear standout as the king metal of new technologies reached its 2011 all-time high of USD 34,000 per metric ton.

The mood is also festive for agricultural commodities, which have rebounded this week. Wheat is up nearly 5% to 645 cents per bushel while corn is up 3.2% to 680 cents. Note the big drop in lumber, which fell sharply to USD 490 per thousand board feet.

Tin prices reach record highs

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Equity markets

Revolve Group is a US-based online fashion retail platform established in 2003. At present, its offering includes more than 49,000 items and more than 1000 global brands. The influencer-driven company describes itself as "the next-generation fashion retailer for Millennial and Generation Z consumers". It is known for its styles associated with social outings, such as dresses.

The group's shares have soared this year by 107%. After a slight revenue decline in 2020 due to the pandemic, the company posted stellar first quarter results, with sales up 22% year-over-year and 30% over the first quarter of 2019, to $178.9 million.

Management declined to provide guidance for the full year 2021, but said that sales growth in April outpaced the 22% growth in the first quarter. With easing restrictions and the return of social events, Revolve is in a good position to deliver good results this year.

Revolve Group

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Macroeconomics

The week was eventful. U.S. June inflation came in at 0.9% month-over-month and 5.4% year-over-year, significantly above market expectations. Prices were overheated in several areas, including energy and automobiles. In recent weeks, the battle has raged between those who believe that this inflation surge is sustainable and those who consider it temporary. The U.S. central bank is in the latter camp. Its boss Jerome Powell reiterated on Wednesday calls for calm, stating that the evolution of prices will not require a brutal action of its services on the quantities of liquidity in circulation. Despite many signals of overheating, many investors subscribe to this scenario, as shown by the real rates in the United States or the 10-year rate, which remained relatively calm between 1.3 and 1.4% despite the new inflationary slippage.

On Thursday, China was the first major country to announce its second quarter GDP. The momentum was still there with a 7.9% increase over the year, slightly weaker than expected (8%) but without too many negative elements. One downside, however, is that the automotive market is constrained by semiconductor shortages, a trend that can be seen almost everywhere on the planet.

Also on Thursday, the European Commission unveiled its major project to combat climate change, which includes spectacular measures, such as the end of new thermal vehicles from 2035 or the taxation of products imported from countries with less stringent environmental criteria. Economic players, especially those in the transport industry, will not fail to campaign for a relaxation. But the ball is rolling and the EU wants to make the region a pilot zone for the rest of the world.

In the foreign exchange market, the euro remains under pressure against the greenback at USD 1.1796, after having tried to climb back above USD 1.18. This trend has been reinforced by fears of the spread of the delta variant of the coronavirus, which is causing renewed risk aversion. This appetite for greenback can be found in the cable, as the pound sterling remains stuck around USD 1.38, despite comments from several British central bankers in favor of reducing the economic support program. The New Zealand dollar (NZD) rose sharply on Tuesday after the central bank decided to end the support program this month. But it later gave back some ground to USD 0.7006.
Investors are waiting for catalysts

This week, indexes have had difficulty finding new bullish catalysts. Next week, markets are counting on the first results of global large caps for the second quarter. On the macro side, we will have to wait until Friday to see the Flash Manufacturing PMI indicator for July. The less confident investors are starting to get dizzy on current highs. The real risk, however, lies in the change in monetary policy by central banks. For now, at least, good weather can be found across markets.