Tuesday
May 28		 Weekly market update
intro The financial markets have seen a return to risk aversion this week following the renewed trade tensions between China and the United States. Investors have therefore made significant net clearances, fearing a substantial impact on the global growth.
Several bargains are being made on Friday. Donald Trump indicated that he remained confident that an agreement would be signed quickly, one that could also include the Huawei dispute by the way.
Indexes

Over the past week, red has been the dominant color on both sides of the Atlantic. In the Euro zone, the Dax has lost 2%, the Footsie 1%, and the CAC40 2.4%. In the peripheral countries of the Union, Portugal, Spain and Italy lost 0.5%, 1.1% and 3.4% respectively.

In the United States, it was the technology stocks and the oil companies that weighed on the trend. At the time we wrote this, the Dow Jones recorded a weekly loss of 1%, the S&P500 was down 1.3% and the Nasdaq100 fell by 2.6%.

In Asia, the Nikkei lost 0.6% and the Hang Seng 2.2%. The latter dropped to only +5% since the 1st of January. As for the Shanghai composite, it lost 1% making it the 5th week in a row that the index goes down and went back 50% of its recovery that started at the end of December (see graph). Chinese stocks, however, remain up by almost 15% since the start of the year. This is one of the best performances of the major indices, in a close race with the Swiss and German indices.


Shanghai Composite Index

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Commodities

Crude oil prices fell sharply this week, weighed down by the new concerns about the market's supply/demand balance. The ongoing Sino-American negotiations on the trade front, coupled with a series of lukewarm macroeconomic statistics, creates fears of a slowdown in the global economy which means a lower demand for hydrocarbons. The industry's structural problems therefore pop up once again, overshadowing more short term bullish factors like geopolitical tensions. The WTI price fell almost 8% to $58.50.


Precious metals stabilized and went up a little despite the new surge in the US dollar. The renewed volatility on the equity markets is good for this asset class, as is the rise of gold and silver which gain respectively 0.6% and 1.8% to 1285 and 14.50 USD.
The rising protectionism, the deterioration of manufacturing SMIs and the rise of the dollar don't go well with the base metals segment: Copper lost 2.7% to 5860 USD per ton and aluminum followed the same route at 1740 USD.


Brent and WTI graph, base 100 at 1 January 2019

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Equities markets

Under Armour

The American company Under Armour is based in Baltimore and operates in the sportswear sector. The company was founded in 1996 by a former American football player named Kevin Plank, hence the name Under Armour, meaning under armour. After all, this makes sense for an American football player.
The company came to Europe in the early 2000s and now sponsors major clubs and sportsman, especially in France with the "Clermont Auvergne" rugby team and judoka Teddy Riner.

The Under Armour share didn't suffer from any index setbacks the past five days and went up by 13%. This recent performance brings the 2019 advance to 37% and places the stock in the top 20 of the S&P500.
The stock has excellent Surperformance ratings that highlight recent upward earnings revisions and a solid financial position.


Strong resilience of the Under Armour share

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Bond market

The sovereign bond market sees a further decline in yields. Rates are at their lowest, like the American T-bond that trades on a 2.37% basis. This trend can be seen across all the sovereign bond benchmarks. The German Bund falls to -0.11%, staying below the symbolic zero for more than three weeks now, with the increased stress about world trade and Brexit. The French OAT also benefits from this, with a rate of 0.28%. The Spanish and Italian debt also benefit from this, with rates of 0.83% and 2.59%. Thanks to the most recent, conciliatory remarks from the Italian Minister of Finance the spread with the Bund has tightened.


The 10-year Swiss bond - which is anchored in negative territory - set a new record at -0.45%. In China, on the other hand, the same reference legitimately is at 3.29%.
Forex market

Forex traders are keeping an eye on the existing trade tensions. In this context, there is hardly anyone willing to bet on a clear direction, not even for the dollar (the dollar index halts at 98 points).
At the same time, Theresa May's failure weighs on the pound, which is losing ground to all its counterparts (-500 basis points against the dollar at $1.27, an annual low). Investors still fear a "Hard Brexit".

At the start of the European elections, the euro resumed its downward trend and is trading below 1.12 against the dollar.
The Sino-American trade dispute continues to drive investors in the yuan away and the yuan is at its lowest level in six months against the dollar at 6.90 CNY. In this context, the Chinese vice-governor insisted on reassuring the market and announced that China has significant resources to deal with undesired fluctuations in its currency.
Finally, the Australian dollar came out as the big loser of the week after the country's central bank report showed that the institution expects interest rates to fall in June. The Aussie currently trades at 0.69 USD, a decrease of 200 basis points.
Economic data

Consumer confidence recovered slightly in the euro zone, from -7.3 in April (revised figure) to -6.5 in May. The provisional indices of purchasing managers, however, were disappointing, especially in3 the manufacturing industry which fell more than expected (47.7 against 48.2). The PMI services index was less affected (52.5 against 53 expected). The German Ifo Business Climate Index also came out below expectations.
In some countries, the polling stations opened on Thursday for the European elections.
In the United States, the sales of new (673K) and existing (5.19M) homes fell in April, as did the orders for durable goods (-2.1%) and the PMI flash indices (manufacturer 50.6, service 50.9). The weekly jobless claims came out at 211K and the crude oil inventories at 4.7 million (consensus -1.2M).

Next week, no major statistics will be published in the euro zone. In the US, we'll look at consumer confidence (Conference Board), housing sales promises, quarterly GDP and the Case Shiller index. Like every week, figures about oil reserves and unemployment registrations will be released. Towards the end of the weekly sequence, the PCE (inflation) and the household spending and income indices, the Chicago PMI index and the Michigan index will be published.
Some lines shouldn't be crossed

The trade was is starting to exhaust investors. While it was initially focused on customs duties on industrial products, the conflict now takes on a whole new dimension. On the foreign exchange market, concern has been expressed with the fall of the yuan. At the same time, Donald Trump crossed a new line by denying giant Huawei access to the US telecom market, hence bringing the conflict into technological territory. Each announcement weighs heavily on the indices as investors react strongly to American or Chinese replicas, the latter being able to influence the rare earth consumption since they are at the origin of 90% of the global production.

The consolidation phase of the equity markets reflects this concern about the overbidding of sanctions eventually leading - as pointed out by the IMF - to a downward adjustment in global growth.