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Weekly market update : Let's keep up the pace

07/23/2021 | 11:42am
Friday
July 23
Weekly market update
intro What a week for investors! They have gone through many emotions these past five days. First a moment of stress at the beginning of the week, which gradually dissipated in favor of euphoria. Financial markets have fully recovered from Monday's drop, boosted by good corporate earnings for the first half of the year.
Indexes

Despite a slip at the beginning of the week, indexes remain well oriented. U.S. markets are once again within striking distance of their all-time highs. At the time of writing, the S&P500 is up 1.4% this week, and is only within a few points of its record at 4,393 points. The same dynamics can be found with the Dow Jones (+0.58%) and the Nasdaq100 (+0.98%).

In Asia, the Hang-Seng gave up 2.83%, weighed down by the resurgence of the pandemic on the continent. The Nikkei, closed on Thursday and Friday for public holidays, also ended down 1.63%.

In Europe, optimism is the order of the day. The CAC recovered and gained 1.5% for the week. The German DAX (+0.78%) followed the same path with more modest gains while the SMI set a new record above 12100 points, helped by the good publications of the major Swiss groups (ABB, Sika, Givaudan etc.).


Commodities

Oil prices gained ground, driven by indicators that point to robust demand. The release of US inventories indicated a recovery in fuel demand, while airline results suggested that air traffic was picking up. The air pocket caused by the OPEC+ supply increase has been completely erased in favor of these encouraging indicators. Brent crude oil is trading at USD 73.6 per barrel, while the US benchmark is trading at USD 71.8.

Gold is back to the $1,800 mark and is struggling to build positive momentum. Risk appetite is outweighing the widening of real yields. Silver continues to tread water at USD 25.1 per ounce. In industrial metals, the Chinese government once again announced its intention to sell off part of its copper, aluminum and zinc stocks in order to curb price inflation. The impact on metal prices was minimal, and they stabilized overall this week.

Finally, in agricultural products, the price of coffee jumped by nearly 13% in five days, due to the capricious weather in Brazil, where frost is rampant.
Equity markets

Chipotle Mexican Grill, the well-known Mexican fast food chain, has over 2,850 restaurants in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants.

It beat consensus in the second quarter of 2021 on continued growth in digital orders and a strong recovery in restaurant sales. Chipotle reported net income for the three months ended June of $188 million, or $6.6 per share, compared with $8.2 million, or $0.29 per share a year earlier. Excluding special items, EPS came in at $7.46. Analysts were expecting $6.53.

Sales jumped 38.7% to $1.9 billion, vs $1.88 billion expected.

For the current quarter, the group expected same-restaurant sales growth in the low to mid double-digit range. For 2021, management is anticipating slightly above 200 new restaurant openings.

Chipotle

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Macroeconomics

On Monday, markets suffered a sharp decline, the magnitude of which is quite rare. This was due to fears of the epidemic gaining ground, implying a drop in cyclical stocks, as well as stocks related to passenger transport and tourism. Indeed, several countries are advising their citizens against spending their vacations abroad due to a high concentration of COVID-19 cases, putting the brakes on a possible full economic recovery. Oil, U.S. bonds and Bitcoin fell at the beginning of the week, before the latter rebounded following Elon Musk's announcements of his personal holding, as well as the possibility that Tesla will once again accept Bitcoin.

Some 85% of S&P500 releases were above estimates. The balance sheet is also favorable in Europe, which has helped European indices erase their losses from earlier in the week.

The ECB announced that it will not stop the monetary artillery until it sees a sustainable inflation of 2%. Meanwhile, OPEC+, has finally reached an agreement on production.

The U.S. PMIs, expected at 62 for manufacturing and 64.6 for services, came in at 63.1 and 59.8 respectively. The services PMI, which stood at 64.6 last month, fell quite sharply. Overall, the PMI indicators are resisting the Delta variant.

Investors are still waiting for the Fed's figures to be released next Wednesday, and are keeping a close eye on the COVID curves, which have proven to be a major indicator. The VIX, an indicator of volatility on the U.S. markets, set a high in this regard on Monday, exceeding 25 points, then stabilized near 17 at the end of the week.

Sharp drop in the VIX

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Let's keep up the pace

It will take more than inflation and the Delta variant to deter investors. Once again, phases of risk aversion remain ephemeral and are often a pretext for cheap buying. Even if the temperature heats up, it remains difficult to wear shorts in this market. Let's ride this upward trend for as long as it lasts...
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