Weekly market update : Indices end the year at the top

Monday December 23

Weekly market update

Financial centres, and particularly Wall-Street, continue their race for records, still driven by the prospect of the signature of a "phase 1" agreement at the beginning of January. Beijing and Washington have recently announced that they have reached an agreement, which has had the effect of cancelling the new customs duties that were due to come into force on December 15.

Indexes Over the past week, the Nikkei lost 0.8% while the Hang Seng gained 0.5% and the Shanghai Composite 1.2%. In Europe, the performances are all positive. The CAC40 rose by 1.6%, while the Dax stagnated (+0.1%). As for the Footsie, it gained 3%, after the Conservatives' victory in the British legislative elections, paving the way for a favourable outcome for Brexit. For the peripheral countries of the eurozone, Portugal gained 0.5% over the week and Spain 0.9%. In the United States, the Dow Jones, the S&P500 and the Nasdaq100 were up 1.1%, 1.6% and 2.1% respectively.

Commodities Crude oil prices end the weekly sequence on a positive note. Buoyed by hopes for improved demand growth after the Sino-U.S. trade deal. Oil is slowly but surely gaining ground. WTI surpassed the USD 60 mark while Brent crude traded at USD 66.5 per barrel. Gold and silver have been flat this week and are trading at USD 1480 and USD 17.15 per ounce respectively. The gold metal is up a little more than 15% since the beginning of the year (see chart) while silver is up 10%. On the base metal side, copper starts a breathing phase at USD 6161, while tin continues to advance at USD 17300 and zinc rebounds to USD 2324. Evolution of the CRB since 2000 (raw materials index)

Equities markets The Greek index Greece, through its national index, ASE, has just signed a historic stock market year with a 47% increase. This advance allows the homeland of the ancient Olympic Games to obtain the gold medal in the world index rankings. The Greek economy is returning to the forefront after an unprecedented financial crisis and drastic measures imposed on the population. Unemployment, which rose to 30% in 2013, has fallen to 17%. Since 2017, Athens has emerged from recession with an average annual GDP growth of 2%. After the sales demanded by European creditors, privatisations have followed one after the other. Greece is even in a position to refinance itself on the sovereign bond market. The 10-year yield fell from 4.5% at the beginning of the year to 1.13%, an all-time low. Quite an achievement when we know that Greek debt is rated BB-, but is a sign that investors no longer imagine Greece exiting the eurozone. The stock market upturn is reflected in the renewed confidence in the banking sector, which is well represented in the ASE index. Performance is set to be exponential, with Attica Bank (+280%), Piraeus Bank (+254%) and National Bank of Greece (+164%) all performing exponentially. Strong surge in the Greek index

Bond market On the bond market side, the spread between BBB and BB bonds reached an all-time low of 0.38 basis points. This is a direct consequence of the yield hunt by investors in the market. The factors behind the decline in yields this year have not dissipated, but they are likely to have less influence on the bond markets, at least in the short term. Against this background, ten-year Bund yields are gradually approaching zero at -0.23%. The French OAT retains its positive yield at 0.06%. Nevertheless, with the ECB's monetary policy being maintained over the coming year, bond purchases by the central bank will help to anchor yields at a low level. The RiksBank has voted to abandon negative rates, but with the deterioration of the economy, it is likely to be a one-off move. Greece, despite a debt rated BB-, is taking advantage of this fundamental movement to finance itself at a reduced rate over its ten years at 1.35%, far from the 4.5% at the beginning of the year. The Swiss bond benchmark still has a negative yield but is rebounding sharply to -0.57% compared with -1.2% just a few months ago. In the United States, the Tbond is slightly under pressure at 1.93%, with growth still showing strong resilience.

Forex market Winning one week, losing the following week, the pound sterling continues its swing, dropping 400 basis points against the dollar after Boris Johnson's strict announcement on a possible Brexit without an agreement in a year's time if nothing is signed with the European Union. Volatility should therefore mark the year 2020 on the British currency. The penalty is also severe against the Euro at 0.855 GBP (+250 bps). With no figures of primary importance in Europe, the single currency has remained confined in narrow bands between 1.11 and 1.12 against the greenback. The dollar remains balanced against the yen in a weak market at JPY 109.5, but loses some ground against the Swiss franc at CHF 0.978 (-100 bps). The Swiss currency is still sought after by Forex traders as the EUR/CHF exchange rate falls below CHF 1.10. Cable retraction

Economic data Recent developments in the trade dispute and Brexit have led to reduced political uncertainty. At the same time, the economic situation is showing signs of stabilisation. The ECB is therefore expected to leave its monetary policy stance unchanged in the coming year. For its part, the Fed could again ease its monetary policy. Central bankers have now switched to a wait-and-see mode in the context of the recent turnarounds. In the United States, manufacturing industry results were slightly below last month's results, as was the euro zone's PMI manufacturing index, which came out below expectations. Looking ahead to the New Year, the focus will be on how the partial trade agreement between the United States and China has affected industry sentiment. As the risk of a further escalation of the conflict remains, there should be only a limited improvement in industrial sentiment in the trading areas. As regards macroeconomic statistics, the confectioners' truce will be in effect until January 3, the date of the new data on the US labour market.

Indices end the year at the top There will be no shortage of qualifiers to characterize the 2019 stock market vintage with stock market indices finishing at the top of their trajectory. At the dawn of the new year, it must be noted that the power of central bankers remains preponderant for the valuation of risky assets. The question of the longevity of this grip is one of the criteria in investors' thinking, so that they can implement their 2020 strategies. This monetary data, which is at the heart of the debate, is at odds with the fears emanating from the spread of protectionism throughout the world. The decline in international trade demonstrates this. In China, the former workshop of the world is being transformed into a technological laboratory. This transformation gives it a real lead, particularly in the field of 5G, one of the strong themes for the coming year, which irritates the United States. The environment will therefore remain delicate for investors, who will have to focus on the dominant themes and identify pockets of growth and therefore performance.