2023-06-26 07:12:25
Dow -0,65%, S&P 500 -0,77%, Nasdaq -1,01%, Russell 2000 -1,44%, SOX -1,77%, Eurostoxx -0,76%, SMI +0,34%.
The merry kingdom of equities is slowly emerging from a sweet dream, in which it was a question of inflation sounding retirement and central banks having become all chouquettes, in finance we say “doves”. The alarm clock looks like a very nice hangover, inflation seems far from having abdicated and the central banks are firing from all sides to bring it down. The icing on the cake, Jerome Powell adds a layer last week before Congress, repeating that the Fed is more determined than ever to bring inflation to its knees, that is to say at 2% (currently 4% ). To further smooth the bulls’ business, Friday sees many PMIs (purchasing managers) miss expectations and drop below the 50 mark, the boundary between expansion and contraction. The bad students of the day are Japan, Germany, the United Kingdom, the Euro zone and the United States, it stings and it doesn’t take much for the cassandras on duty to bring out the word “stagflation”, Nouriel Roubini should be back on TV sets today.
It is an understatement to say that the central banks are firing on all sides. The Bank of England raises its rates by 50 basis points, just like the Norges Bank (Norway) while economists predicted 25 bps. We are also hawkish in Australia, Canada, Switzerland and Turkey, which is a bit much for a Fed that is due to announce its next rate decision on July 26th. As things stand, the Fed Funds are predicting a 69% chance of a 25 basis point hike on this occasion. This once once more aggressive posture of most of the planet’s central banks (with the notable exception of Japan and China), coupled with last week’s PMIs, confirms the current posture of the US bond market, including curve 2 / 10 years is -101 basis points. At the end of the week we also observe a return to grace of the dollar, especially once morest the euro, the pair had come to test 1.1012 on Thursday, it is evolving this morning at 1.0905. We also observe that the Norwegian and English currencies do not really benefit from the announcements of their central banks. On the equities front, last week saw China relapse by 5% (desperately seeking economic recovery), things are going a little better in the United States but the good momentum of recent weeks seems to be broken, sentiment is deteriorating on the trading floors and the S&P500 index (SPX) is having its worst week since March.
Volatility is on the mat (the VIX at 13.44, its lowest level since January 2020), the retreat of equities is general on Friday, the breadth indicates 2 stocks down for 1 up at the close, the 11 sectors of the SPX are retreating, trading volumes are exploding upwards, the Russell2000 (RTY) and semiconductors are leading the selling sling, the army is therefore in the process of descending into the plains and the generals seem to want to follow them there. For once, let’s talk regarding bitcoin, which rose to 30,000 dollars last week, driven by the filing of numerous requests for ETFs, made in particular by Blackrock, WisdomTree, Bitwise and Invesco. On the oil side, it’s Xanax and blinds closed, the barrel of WTI Light Crude does not manage to recover the level of 70 dollars, the central banks’ fight once morest inflation displeases it greatly, we even ignore the surprise drop in American stocks last week, that is to say if the patient is in bad shape. The situation is not much better on the side of gold, which slips to 1923 dollars an ounce, technically its next supports are at 1892 dollars then 1853 dollars.
Vladimir Putin faces the biggest challenge of his two-decade rule with a short-lived mutiny. The leader of the Wagner mercenary group, Evgeniy Prigozhin, halts the advance of his fighters towards Moscow as part of a deal brokered by Belarusian President Alexander Lukashenko to end the 24-hour uprising without risking legal action . Mr Putin has not been seen in public since Saturday and Mr Prigozhin made no comment. Antony Blinken says the uprising poses a “direct challenge” to the Russian leader and gives Ukraine an advantage on the battlefield. China expresses support for Russian efforts to maintain national stability following Foreign Minister Qin Gang met with the Kremlin’s Deputy Foreign Minister in Beijing. An adviser to Volodymyr Zelenskiy says there are no signs that Wagner fighters are withdrawing from conflict zones in Ukraine.
Greece’s Kyriakos Mitsotakis wins the election hands down, giving him a comfortable parliamentary majority that will allow him to form a one-party government and implement investor-friendly policies. His center-right party, New Democracy, won 40.5% of the vote following counting nearly 90% of the ballots. The left-wing Syriza party of ex-Prime Minister Alexis Tsipras sinks, obtaining 17.8%.
News from the ECB: Luis de Guindos says the central bank is “entering the home stretch” of tightening. Exact date for stopping rate hikes ‘will depend on the data’, he tells the newspaper ABC. When rate hikes will be suspended will be a topic of discussion today as ECB officials gather in Sintra, Portugal, for their annual forum.
The week which is beginning will still be paved with numerous speeches by central bankers from all continents. In macro-economic terms, we will notably be monitoring US consumer confidence tomorrow, Chinese PMIs on Friday, but above all the US PCE index (Personal Consumption Expenditure), which will be published on Friday and is the Fed’s favorite indicator for measuring the inflation. In Europe, the ECB’s Central Bank Forum is taking place this week in Sintra, Portugal. The market will be very attentive to the signals issued by the President of the ECB, Ms. Lagarde. Sweden’s Riksbank will deliver its latest policy decision on Thursday, with markets expecting a 25 or 50 basis point hike.
On the macro-economic menu of the day, the German Ifo on the business climate will be the main statistic of the session and will be unveiled at 10:00 am.
The CEO of Nvidia says his group should “very likely” invest in Europe. Novo Nordisk’s weekly insulin controls blood sugar levels longer in a late-stage study. Leonteq lowers its profit forecast for fiscal year 2023. Commerzbank expects its second-quarter results to be impacted by additional provisions in Poland. Australia’s Element 25 will supply manganese sulphate to General Motors Company under a supply contract.
Tonight and this morning in Asia, the indices are trading lower, with the exception of Seoul, which rose by 0.47%. Tokyo fell 0.25% at the bell, Hong Kong lost 0.35% and Shanghai dropped 1.51%. The SPX future recovers 4 points and Europe is indicated up 0.2% at the open.
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