Weekly market update : Will August break the trend?

In early August, the financial markets faced challenges due to renewed tension over US interest rates. The downgrade of the US credit rating by Fitch raised concerns, and there was uncertainty about the Federal Reserve's rate decisions. However, the release of monthly employment figures on Friday brought some relief, despite indicating a tight labor market, which could complicate the central bank's efforts to reduce economic overheating.

Weekly variations* US 500 4478  -2.27% ARISTA NETWORKS, INC... +18.87% GLOBAL PAYMENTS INC. +12.64% CONSTELLATION ENERGY... +8.56% GENERAC HOLDINGS, IN... -23.98% FORTINET, INC. -26.08% DXC TECHNOLOGY COMPA... -30.25% DOW JONES INDUST... 35065.62  -1.11% NASDAQ 100 15274.92  -3.02% FTSE 100 7564.37  -1.69% GOLD 1942.51$  -0.80% WTI 82.32$  +2.59% EURO / US DOLLAR 1.10$  -0.14%

This week's gainers and losers

TOPS: Vertiv Holdings (+33%): The American digital infrastructure provider is riding on the artificial intelligence craze. The group, which sells hardware, software and analysis tools to manage data centers and communication networks, has unveiled exceptional quarterly results, with revenues up 23.6% year-on-year and well ahead of estimates. The operating margin (14.5%), operating cash flow and outlook unveiled by management also delighted the markets. BofA raised its opinion on the stock.    Carvana (+18%): Continued rebound for the online used car dealer, which will be unloved by the markets in 2022. The troubled group is still benefiting from the renewed interest initiated last week, when it announced that it had reached a restructuring agreement with its creditors to reduce its debt by more than $1.2 billion. The e-commerce platform is also benefiting from a "meme" effect, i.e. share price rises driven by individual investor flows against a backdrop of emotional reactions. The stock has gained over 1000% since the beginning of the year. Domino's (+17%): Solid quarterly results for the UK division of the pizza specialist, with sales up 20%, driven by higher volumes. Earnings, dented by higher costs and interest expenses, remained stable year-on-year. The delivery company also announced that it had reduced its net debt by 27% and raised its annual profit forecasts. The company is the first in the fast-food sector to adopt the Science Based Targets Initiative's Net Zero by 2050 environmental objectives. Teva Pharmaceutical (+12%): Good news galore for the Nyse-listed Israeli pharma. Second-quarter sales were up 2%, with better-than-expected earnings boosted by higher sales of its Austedo treatment for Huntington's disease. It has therefore raised its outlook for the year. The Group is also making progress in resolving its legal disputes (generic price-fixing and opioid cases), which seems to be reassuring the markets, and on upcoming drug launches. Bae Systems (+9%): buoyed by record orders and a sharp rise in first-half profits, the British defense and aerospace specialist raised its annual guidance this week. Buoyed by the war in Ukraine, the group reported sales up 11% for the first 6 months of the year. It also announced that its Board of Directors had approved a new £1.5 billion share buyback program over 3 years.    Caterpillar (+8%): The American manufacturer of construction equipment is doing well. The group closed a solid quarter, better than expected, buoyed by strong orders in its 3 segments (energy and transport, mining, construction) and by the strength of the US market. Analysts also hail the build-up of dealer inventories as a sign of an expected recovery. Finally, net income almost doubled over the period. FLOPS: Zoominfo Technologies (-28%): The US specialist in marketing data and customer relations software (not to be confused with its fellow countryman in videoconferencing) unveiled disappointing results for the quarter just ended, slightly below expectations, and revised its full-year revenue and profit forecasts downwards. Analysts fear that the arrival of generative AI in the sales field will disrupt the Group's activities. In the wake of this, several analysts have reduced their price targets on the stock. Solaredge (-19%): The American solar panel manufacturer deplores a drop in demand in Europe, but especially in the United States. Since electricity prices have fallen across the Atlantic, investments in solar solutions appear less advantageous. Rising borrowing costs and the recent meter reform in California have also impacted household spending. Finally, the Group has forecast third-quarter sales below Wall Street estimates. Expedia (-15%): Expedia disappoints. The American travel agency reported quarterly sales slightly below Wall Street forecasts. This announcement cast a pall over the sector, which fears that the strong post-pandemic rebound in tourism will be short-lived. Adjusted quarterly earnings, however, exceeded market expectations. Paypal (-14%): The American fintech reports solid results in line with expectations, with quarterly sales up 7% to $7.3 billion, but investors are severely punishing the payment solutions provider's declining transaction margin.

Commodities

Energy: Another week of gains for oil, the sixth in a row. A bullish surge largely due to the extension of production cuts by Russia and Saudi Arabia. The latter declared that "not only would it recognize its unilateral reduction of 1 million barrels per day until September, but it could also extend and deepen it until autumn". Russia then followed suit. Russia's Deputy Prime Minister, Alexander Novak, said his country would cut exports by 300,000 barrels a day in September. Last month, Moscow had already announced a reduction of 500,000 barrels per day in August. The record fall in US crude oil inventories also helped bring Brent closer to its highest price in over three months. At the price level, Brent is trading slightly above 85 USD a barrel, compared with 82.2 USD for its US counterpart, WTI.   Metals: Gold prices rose on Friday after the slightly weaker-than-expected US jobs report sent the dollar and Treasury yields lower, offering some respite to bullion, which was still on track for its worst week in six years. An ounce of gold is trading at around 1945 USD on the LME, compared with 23.7 USD for silver and 1251 USD for an ounce of palladium. Agricultural products: To end the week, wheat jumped over 3% following the Ukrainian attacks on the Russian Black Sea port. Corn and soybeans also advanced, partly in the wake of wheat, although forecasts of cool, wet weather in the US Midwest limit the potential for price rises. Wheat fell to 628 USD, while soybeans and corn reached 449 and 482 USD per bushel respectively. Vietnamese coffee prices also rose slightly on the previous week. The reason: a rise in world prices due to low export estimates from Brazil, the world's leading Arabica producer.

Macroeconomics

Atmosphere: The big event of the week was undoubtedly the surge in US bond yields, with the 10-year maturity rising from 3.8% in mid-July to 4.18% on Friday. Flashback: the good performance of the latest US macroeconomic indicators once again dispelled the prospect of an economic slowdown. The other side of the coin is heightened mistrust of the trajectory of monetary policy. At the same time, Fitch stripped the US debt of its "AAA" rating. Of course, S&P had already done so twelve years earlier, but this symbolic decision has put the US debt back in the spotlight. Fitch insisted that the exacerbation of the political divide was an additional source of concern. These two events contributed to tightening bond markets, which in turn had a knock-on effect on equities, which were rather badly hit this week. They also strengthened the dollar, at least until Friday, when the euro made a small breakthrough to USD 1.0993 after the publication of the July employment figures in the United States. Other macroeconomic news consequently took a back seat, notably the expected quarter-point rate hike by the Bank of England and the less-anticipated status quo by the Bank of Australia. Crypto: Bitcoin remains almost perfectly balanced this week, down 0.18%, and remains close to $29,200 at the time of writing. Ether, meanwhile, is hot on the heels of the market leader, falling by just under 1% since Monday, and still hovering around the $1,850 mark. But it's been a busy week in the crypto sphere. Several major decentralized finance platforms (DeFi) suffered cyber-attacks that could have been costly for many investors and speculators who dabble in the lending and borrowing protocols of this financial sphere. This anxiety-inducing atmosphere has done little to restore confidence in the ecosystem, which is reflected in the prices of the main crypto-assets this week.

Will August break the trend? Next week sees the return of price statistics. July inflation and producer prices for China (Wednesday) and the USA (Thursday and Friday) will take center stage. The two powers have very different problems to deal with. Beijing faces the threat of problematic deflation, while Washington fears a reacceleration in price rises after the lull of recent months. On Friday, investors will also be interested in US consumer sentiment, as measured by the University of Michigan. On the corporate front, the majority of influential companies have already published their results, but there are still a number of items on the agenda for next week. For example, Eli Lilly, United Parcel Service, Zoetis and Walt Disney in the USA, and Siemens Energy, Glencore, Bayer, Ahold Delhaize and Novo Nordisk in Europe.

Things to read this week

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*The weekly movements of indexes and stocks displayed on the dashboard are related to the period ranging from the open on Monday to the sending time of this newsletter on Friday. The weekly movements of commodities, precious metals and currencies displayed on the dashboard are related to a 7-day rolling period from Friday to Friday, until the sending time of this newsletter. These assets continue to quote on weekends.