Monday
January 14		 Weekly market update
intro The financial markets have clearly recovered this week, with reassuring data on US employment, more accommodating comments from central bankers (Fed and ECB), but especially because of the resumption of Sino-American negotiations to try to put an end to the trade dispute. However, some clearances are taking place on Friday, with persistent American political tensions linked to the shutdown.
Indexes

The main geographical areas recorded a positive weekly performance.
In Asia, the Nikkei and Hang Seng gained 4.1% while the Shanghai Composite struggled to recover 0.8%. In the US, the Dow Jones, the S&P500 and the Nasdaq100 performed 1.7%, 2% and 2.4% respectively.

In Europe, the gains are less significant. The CAC40 only gained 0.8%, the Dax 0.9% and the Footsie 1.2%. For the peripheral countries of the euro zone, Portugal won 1.45%, Spain 1.35% and Italy 2.2%
 
Commodities

The beginning of the year is clearly marked by volatility on the oil markets. The daily variations are significant and perfectly reflect operators' concerns about the market's ability to rebalance itself in a context of economic slowdown. Saudi Arabia's efforts tend to appease the market, which welcomes its promises to reduce its crude oil exports. Brent crude oil rose by nearly 8% to around $62 per barrel.

Precious metals are still on the rise, despite the good performance of risky assets. Gold and silver are indeed taking advantage of a decline in the dollar to rise up. As such, gold metal won 0.6% to $1293 per ounce while silver rose 0.2% to $15.7. This context also benefits palladium, which maintains a strong upward trajectory, allowing it to outperform gold prices (see graph below - Or = Gold).

The base metals sector is recovering, greatly helped by a resumption of Sino-American negotiations on trade issues. As a result, nickel has increased by 7.5% since January 1, while copper has gained 1.2% to $5908 per tonne.


Gold - Palladium graph

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Equities markets

Netflix: rewarded

The company stands out, with a 22% increase since the beginning of January. Its triumph at the "Golden Globes" ceremony allowed Netflix to stand out in the eyes of investors. The streaming video giant spends billions of dollars each year producing original works. It won five awards, including for a film called "Roma", as well as "Bohemian Rhapsody".

By the end of 2018, the share price had fallen by 40% in line with the GAFA, to rebound violently during the first sessions of the new year. Its valuation now amounts to 140 billion dollars, the equivalent of L'Oréal, and over 10 years the share has experienced an incommensurable 6840% trajectory. Another beautiful Californian story.

Netflix share price

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Bond market

The sovereign bond market remains buoyant at the beginning of the year due to prevailing risk aversion. Yields are on a downward trend, as in the case of the American 10-year period, at 2.7%. These arbitrations in favour of securities offering greater security also allow the Bund and the French OAT to be sought, hence the reduction in their rates to 0.23% and 0.65% respectively. Italy also benefits (2.75%) and Spain (1.43%).

Switzerland and Japan stand out, with the Swiss Confederation reporting a largely negative return on the 10-year benchmark (-0.22%), while the country of the rising sun sees its bonds generate a zero return (0.05%).

T-bond graph

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Since the double top at 3.25% (A), the American 10-year rate has remained correlated to the evolution of equity indices, confirmed by a slight recovery in the last few sessions (B).
Forex market

The British pound is recovering a few colors on the dollar at $1.28 (+300 basis points), despite uncertainties about the upcoming Brexit deadlines and, in particular, on January 15, with the vote of the Parliament. The Canadian dollar is experiencing a strong recovery following the oil rebound, it gained 500 basis points against the euro (CAD 1.52) and the same against its cousin currency, the US dollar, at CAD 1.32. The European currency confirms its recovery against the yen at JPY 125 (300 points) and against the greenback at $1.152.
Economic data

In Europe this week, we saw the Sentix index and retail sales above expectations (at -1.5 and 0.6% respectively). The unemployment rate also published well, at 7.9% compared to the expected 8.1%.

In the United States, the ISM's non-manufacturing PMI index was disappointing (at 57.6). The consumer price index came out as expected at -0.1%. Crude oil inventories fell by 1.7 million barrels (-2.4M consensus) and unemployment registrations were pleasantly surprising (216K vs. 226K).

Next week, industrial production, trade balance and consumer price index will be released in the euro zone.

In the United States, we will know the level of producer prices, the New York and Philadelphia Fed manufacturing indices, as well as import prices, capacity utilization rates, industrial production and the Michigan index. Finally, as every week, crude oil inventories and jobless claims will be published.

It should also be noted that the Fed will publish its "Beige Book" and then the G20 summit will start on Thursday.
An improvement favouring the return of risk

The fires are not extinguished, far from it, but they are not progressing any further. The intensive negotiations between the Americans and the Chinese, combined with Powell's recent speech showing more patience in his monetary normalization, have effectively opened a window of risk taking on the markets.

Representatives of the two leading economic powers travel extensively to build a trade agreement while, at the same time, the status quo on rates becomes, in fact, possible in view of indicators showing stable inflation.

That's all it took to activate low-cost purchases on stocks that have regained attractive valuations, following the optimum stress recently achieved. Nevertheless, volatility is expected to persist in the first quarter, given a very busy schedule.