Weekly market update : A period of uncertainty driven by tweets

Monday May 20

Weekly market update

Heckled last week, with the return of trade tensions between China and the United States, the major indices finally continued their consolidation movement this week, after the announcement of the Chinese response. Operators only temporarily took advantage of hopes of easing tensions before the G20 and the announcement of the postponement of the surtax on European vehicles imported into the United States. Europe finished in scattered order while Wall-Street consolidated without any real intensity and Asia continued its decline of the previous week.

Indexes Over the past week, the CAC40 gained 1.8%, the Dax 1.3% and the Footsie 1.9%. For the peripheral countries of the euro zone, performance is mixed. Portugal fell by 1.1% while Spain won 1.5% and Italy 1%. In the United States, the Dow Jones, the S&P500 and the Nasdaq100 posted weekly returns of -0.45%. In Asia, red also dominates. The Nikkei lost 0.44%, the Shanghai composite 1.9% and the Hang Seng closed the gap with -2.1%.

Commodities The escalation of tensions between Saudi Arabia and Iran has monopolized the attention of oil market operations last week. The situation remains tense as the Saudi kingdom accuses Iran of sabotage of tankers in the Persian Gulf. In this context, attacks on Aramco's oil installations only exacerbate tensions. The increase in crude oil inventories thus took a back seat, as did the rise in US crude oil exports. The WTI is improving over the week and is trading around USD 63. After briefly passing the USD 1300 mark, gold is losing ground, weighed down by a recovery in fundamental dynamics on the equity markets. The gold metal thus stands still on the weekly sequence at USD 1286, while the silver gives up 1.7% at USD 14.5. Base metals are recovering some colors after the heavy releases recorded since March. As such, aluminium and nickel advanced respectively by 3.7% and 2.9% to USD 1832 and USD 12215. The tonne of copper, on the other hand, stabilized at USD 6089.

Equities markets Bechtle: "Sharpe the future", the leitmotif of Germany's largest IT system integrator Specializing in the online distribution of IT equipment, the German group carries out three-quarters of its business in Germany, the remainder being mainly in Switzerland and Austria. The Baden-Württemberg-based company employs more than 8,000 people and is worth 4.3 billion euros. At the fundamental level, the stock stands out in the "Surperformance" ratings with an excellent growth rating. Indeed, the estimated turnover for 2019 at 5 billion would be up by 17% compared to 2018, with a net margin of more than 3.2%. The recent upward revisions on its activity, by the analysts who follow the stock, have just boosted the share price (+12% over the sliding week, bringing its annual earnings to 50% within the Stoxx Europe 600) Despite the beginning of a market consolidation, the stock has made a resilient course. Evolution of the Bechtle share price

Bond market In the bond world, the news also remains focused on the Sino-American trade war. The effect of the Chinese response was felt on the T-bond at age 10. The reference in the United States fell to a 2-year low of 2.38%. The demand for sovereign bonds is also evident in Europe, where the Bund has just returned to negative territory with a yield of -0.11%. The French OAT followed the trend at 0.27%. Japanese investors bought a record volume of bonds issued by Paris (€22 billion in March compared to an average of €5 billion). Indeed, the French bond generates a more attractive yield than its German counterpart and compared to Anglo-Saxon securities, due to currency hedging. Spain lost 10 basis points to 0.88% and Italy to 2.67%. For its part, Switzerland's rate fell to -0.44% and is approaching its 2016 record of -0.65%. Graph of the T-Bond T-Bond close to 2-year lows

Forex market The foreign exchange market is becoming more volatile. As the trade dispute escalates, traders remain alert to their positions. First victim, the Chinese currency. The renminbi fell by 1% to USD 6.91, falling to its lowest level of the year (see graph). At this stage, the movement is more symbolic, as the Chinese currency has the potential to fluctuate more than before. Arbitrages also affect the Australian currency, which is deteriorating against the yen at JPY 76 (-400 basis points) and against the dollar at USD 0.69 (-150 points). The AUD is penalized by Chinese industrial production in "weak" growth (5.4%) for April against 6.5% expected. The Japanese currency is recovering in a more risk averse international climate. The yen is trading at 140 against the pound sterling (+500 basis points), at 122.50 against the euro (+300 points). Pressure is also being felt on the British currency, which is at its lowest level since February against the greenback (USD 1.28) and the euro (GBP 0.87). The dollar is recovering a few colors thanks to the accumulation of good news from economic statistics. This recovery is taking place against the European currency, with the EUR/USD parity falling back below USD 1.12. Yuan renminbi Depreciation of the yuan after D. Trump's tweets of May 5 on customs duties

Economic data The ZEW index of German economic sentiment was disappointing (-2.1 in May, against +5.1 expected) and the euro area trade surplus fell in March (to 17.9 billion euros, against 20.6 billion in February). The second estimate of quarterly GDP for the euro area came out as expected at 0.4%, as did industrial production at -0.3% and the consumer price index (1.7%). In the US, the statistics are mixed. Retail sales, which had jumped by 1.6% the previous month, stood at -0.2%. The capacity utilization rate and industrial production were also disappointing. On the other hand, the New York Fed (17.8) and Philadelphia (16.6) manufacturing indices were pleasantly surprising, as were building permits, housing starts and weekly unemployment registrations. Crude oil inventories amounted to 5.4 million barrels. This week in the euro zone, we will look at consumer confidence, the PMI flash indices (manufacturing and services) and the Ifo business climate index in Germany. The European elections will start on Thursday May 23 in the United Kingdom and the Netherlands and will end on Sunday May 26, in France in particular. On the US side, the following will be unveiled: sales of new and existing homes, PMI flash indices and orders for durable goods. Then, as every week, we will know the number of jobless registrations and the level of crude oil inventories.

A period of uncertainty driven by tweets A softer customs rhetoric has enabled the various European financial centers to partially compensate for their dark red start to the week. The index paths show an increase in volatility as D. Trump's digital interventions increase. Its desire to shake up the established trade order encourages investors to be cautious and to take advantage of opportunities. The "zig-zag" configuration should therefore continue throughout this cycle of uncertainties. More pragmatically, let us note that the graphical configuration of the various indices certainly proves the implementation of a short-term correction wave in its simplest, quickest and sometimes broadest form, but that it is part of a medium-term upward trend.