Weekly Market Update: A Quiet Week



May 31st
Weekly market update
Friday ended another week in the green for most financial markets, which welcomed the improving economic outlook, reassured by the accommodating tone of central bankers. Despite a surge in inflation, defined as temporary, it seems too early to consider raising rates or cutting back on the asset purchase programs needed for the recovery. Traders should pay close attention to a possible change in tone in the coming weeks, which could be a source of volatility for the indices. For the moment, the appetite to buy remains.

In the last weekly streak, Asia is doing well. The Nikkei is up 2.9%, as the yen retreats, despite the extension of the state of emergency in Japan until June 20. The Hang Seng gained 2.3% and the Shanghai Composite 3.2%.

In Europe, performance was more mixed. The CAC40 gained 1.5%, the Dax 0.6% while the Footsie gained 0.3%. In the south, Spain is stable, Portugal is down 0.4% and Italy is up 0.6%.

The Dow Jones rose 1%, the S & P500 by 1.3% and the Nasdaq100 by 2.3%. The technology stock index remains slightly below 3% of its annual highs.

Basic products

Oil markets almost had a clean sweep last week, with four out of five sessions positive. Supply concerns quickly dissipated thanks to good US economic data, which meant strong demand for crude oil. As a result, Brent crude has once again crossed the symbolic $ 70 per barrel mark, while WTI is trading around $ 67.

Gold attracted attention, briefly breaking above the $ 1,900 per ounce mark. The precious metal is hardly avoided despite the relentless rise in the equity markets and benefits from an easing of long-term real rates. Silver, meanwhile, continues its stabilization phase at 27.5 USD.

Industrial metals remain well oriented. As proof, copper again exceeded 10,000 USD per tonne. Aluminum is trading at $ 2,388, while nickel is trading at $ 17,360.

New annual record for WTI

Equity markets

Wacker Chemie AG is a German company specializing in silicone. It supplies chemicals ranging from cosmetic powder to solar cells. Although it is active in all major sectors, it is particularly active in the automotive and construction sectors. Wacker has approximately 14,000 employees, 26 production sites around the world and a range of 3,200 products.

The company has achieved a performance of 20% since the start of the year. The chemical industry in Germany is very optimistic about the economic recovery. Most industry representatives in the country have revised their forecasts upwards. This can be explained on the one hand by favorable signs of an economic rebound expected in the coming quarters, but also by the fact that demand has recently exceeded supply.

Wacker Chemie is capitalized at 7 billion euros and is trading at 19 times its 2022 profits.

Wacker Chemie share acceleration

Bond market

The bond market showed little movement on the weekly streak, with yields largely replicating recent levels. The German Bund remained in negative territory at -0.17%, despite a slightly disappointing 15-year auction. Investors, looking for yield, were more inclined to a US issue.

Indeed, on the other side of the Atlantic, the yield of the main bond stabilized at the top of the curve at 1.61%. In France, the OAT reports 0.17% and the gain for Italy is more substantial, at 0.94%, while the Spanish debt reports 0.48%.

As for Switzerland, the national ten-year bond is increasingly advantageous, with remuneration close to positive at 0.19%.

Change market

The pressure on the dollar continues with the greenback at its lowest level for three months against a basket of currencies. Bets on a robust global economic recovery continue to support currencies deemed riskier. Investors are therefore scrutinizing monetary policies on both sides of the Atlantic, but the Fed and the ECB are refraining from opening the door to a rate hike. EUR / USD is trading around 1.22 USD. In Europe, too, the pound is on the rise again after a BoE member spoke of a likely rate hike in early 2022. The UK currency is trading at 1.17 EUR and also marks a plus high against the yen at 156 JPY.

In the southern hemisphere, the Kiwi is benefiting from the same New Zealand central bank key rate announcement and is trading at a three-year high against the yen at JPY 80, down from 74 in January. The Indian rupee, beaten for several weeks, is regaining the confidence of traders, confidence that has returned thanks to the slowdown in coronavirus infections and which strengthens the prospects for a partially locked-in economy. The currency took the opportunity to go from 75.40 to 72.60 against one dollar.

Economic calendar

No statistics for the euro zone last week. In Germany, GDP fell 1.8% (-1.7% expected), but the IFO beat expectations at 99.2. Import prices rose 1.4% (1% expected and + 1.8% last month).
In France, consumer spending fell 8.3% (-0.3% last month) and GDP by 0.1% while analysts expected a rise of 0.4%. The consumer price index rose 0.3%.

In the United States, among disappointments, new home sales rose only 863K, pending home sales fell 4.4%, and durable goods orders fell 1.3%. GDP was in line with the first estimate, up 6.4% year on year.
On the positive side, weekly jobless claims fell to 406K, household income fell only 13.1% (consensus -14.2%) and the Core PCE index rose 0.4% in April (+ 3.1% year on year).

A quiet week

As a movement of inertia that continues to gain momentum, the MSCI World Index is heading straight for a seventh consecutive session of gains. Investors play short movements on low volumes and are reassured by the valuations of technology stocks, which are gradually returning to reasonable prices. However, they are not forgetting their concerns about inflation, which have been marked by renewed interest in cash and gold recently.
Banking and insurance stocks are benefiting from the recent rise in bond yields. In the east, Chinese stocks posted their best weekly performance in more than three months, as the strengthening yuan encouraged foreign capital inflows. It was a rather quiet week, with reassuring speeches from central banks.

MarketScreener.com 2021



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