Weekly market update : Partially relieved

Monday December 16

Weekly market update

After a wait-and-see approach at the beginning of last week, before central bank meetings, the indices have in unison set new records thanks to the announcement of an agreement in principle between China and the United States, but also because of the upcoming finalisation of Brexit, after the Conservative Party's victory in the British elections. The horizon therefore seems to be brightening as central bankers continue their accommodative monetary policy next year.

Indexes Over the past week, all the major indices have improved, especially in Asia, with a Hang Seng recovering 4.5%. The Nikkei gained 2.8% and Shanghai composite 1.9%. In Europe, the CAC40, DAX and Footsie posted positive results, with weekly gains of 0.9%, 1% and 2.1% respectively. For the peripheral countries of the euro zone, Portugal won 0.5% and Spain 2%. In the United States, the Dow Jones finished the week with a rise of 0.5%, the S&P500 0.7% and the Nasdaq100 1.1%, with all three indices having set new historical records, at least in trading.

Commodities Oil markets gained some ground this week, without giving in to the euphoria of a possible Sino-American trade agreement. This is a report by the International Energy Agency (IEA) which expects oil stocks to increase, despite additional efforts by OPEC+ to reduce their production. The WTI is approaching the USD 60 mark while the Brent is trading at USD 64.8. Despite the strong increases in equity indices, gold stabilized after a further attempt to overrun the USD 1475(see graph). The money also increases and comes back to USD 17. Copper prices have jumped this week. The global economic barometer is now at around 4% to USD 6,097, due to the approach of a settlement on the trade front. Lead, nickel and tin also rebounded to USD 1920, USD 13810 and USD 17185 respectively. Gold stabilizes

Equities markets ASML Holding Founded in 1984 and based in Veldhoven, the Netherlands, ASML (Advanced Semiconductors Materials) has given the world's leading chip manufacturers the power to mass produce patterns on silicon, which has enabled it to become the leader in the semiconductor industry. Emanating from the Dutch giant Philips, the company was listed in 1995, both on the Amsterdam Stock Exchange and in New York. In the 2000s, thanks to new technology, customers were able to produce even smaller chips. ASML sells in many countries, including Korea for one-third of its turnover, the United States for 18% and China for 16%. The stock took advantage of the renewed interest in the sector to accumulate 85% of earnings over the year, valuing the group, 50 billion euros more than a year ago. With this new progress over the current financial year, the overall performance over the last decade has reached more than 1000%. Linear path of the ASML Holding share

Bond market Throughout this week, there was room for volatility in the bond market. With the trade agreement and increased visibility on the Brexit calendar, sovereign bond yields have been on the rise. Nevertheless, the levels are still largely advantageous for all debts. In the United States, the 10-year Tbond yield reached 1.90%, up 10 basis points per week. Like all bond benchmarks, the US rate is at the high end of its 5-month trend. In Europe, the Bund rose to -0.23%, while the French OAT remained positive (+0.05%). The increase also characterises the yields on Italian (+1.34%) and Spanish (+0.46%) debt. For its part, Switzerland's 10-year bond is traded on a basis of -0.58%, far from the lows of last August at -1.18%.

Forex market And the winner is... the pound sterling. Indeed, the British currency benefited greatly from the Tories' victory. Prime Minister Boris Johnson will thus have a free hand to get the agreement with Brussels adopted by MEPs and trigger a departure from the European Union on January 31. The pound is therefore soaring against all its counterparts, particularly against the dollar (USD 1.35), the Swiss franc (CHF 1.33) or the euro (GBP 0.83), a 30-month high. Forex traders are correcting an extreme situation, in which the British currency was undervalued by months of uncertainty surrounding a historical divorce, even if these uncertainties will persist. The dollar fell against the euro (USD 1,117) while the Fed left its rates unchanged and stressed that it wanted to see inflation "persist" before raising them. Mr. Powell explained that inflation was barely accelerating despite the fact that unemployment was at its lowest level in 50 years and was expected to remain there. The idea that an increase in rates is not on the agenda tends to weigh on the currency. Breakout of the cable

Economic data The publication of the ZEW marked the beginning of a busy macroeconomic week. At 10.7 points, the highest value since February 2018, the indicator confirms that the economic situation in Germany is recovering. The survey of the famous Bavarian Institute is conducted among about 300 German institutional investors and analysts, and asks respondents to assess the relative economic outlook for the next six months in Germany. In terms of prices, inflation in China reached 4.5% in November at an annual rate, driven in particular by porc prices. The country's most consumed meat experienced a new outbreak and more than doubled (+101.3% in October). At its December meeting on monetary policy, the US central bank decided to leave monetary policy unchanged. This development is in line with the expectations of financial markets. Rates are expected to remain stable in 2020. To the great relief of Fed Chairman Powell, there were probably no dissenting votes on that occasion. In Europe, the first conference of the new ECB President, Christine Lagarde, essentially reiterated a well-known speech, namely that the monetary policy stance will remain accommodative for the time being and that it will take time to revise the Institute's strategy. Central bankers therefore remain under increased surveillance.

Partially relieved The two major uncertainties of 2019 are getting resolved. These two early Christmas gifts could effectively remove risk to the evolution of international trade. But here it is, nothing is simple, especially with Trump, who can blow hot and cold on his Twitter account. As for Brexit, the timetable is becoming clearer in theory, but the work of negotiating with the European Union will be long before an official release. Investors are therefore not completely relieved, fuelling a year-end that could lead to an increase in volatility.