Monday Report

Economy

Last week’s US statistics were lacklustre. Consumer confidence (Univ. of Michigan), expected to rise in May, fell from 88.3 to 82.8. Retail sales were flat in May, though this disappointment was offset by the previous month’s numbers being revised upwards. Industrial production was up 0.7% MoM in April. Consumer price inflation quickened more than expected, to 4.2% YoY, while producer price inflation came in at 6.2% YoY. In the eurozone, the Sentix and ZEW confidence indicators both rose (up from 13.1 to 21 and from 66.3 to 84 respectively), while industrial production was disappointing (up 0.1% MoM). In China, April retail sales were very disappointing (up 17.7% YoY), while investment (up 19.9% YoY) and industrial production (up 9.8% YoY) were both in line with expectations.

Climate

The United States Environmental Protection Agency (US EPA) has released a climate report delayed by Donald Trump since 2017. The report confirms that coastal flooding in the US is now five times more common than in the 1950s, heat waves are occurring three times more often than in the 1960s, and Arctic sea ice in September 2020 covered 900,000 square miles (3.5 times the size of Texas) less than its historical average for the month.

Markets

Inflationary fears fuelled market volatility, causing equities to lose ground (down 1.4% in the US, 0.5% in Europe and 3% in emerging markets). Ten-year sovereign yields rose (up 10 bps in EUR and 5 bps in USD) but credit spreads held steady. The dollar was stable, while commodity prices fell (with the CRB index down 1.8%). Gold held firm (up 0.1%). To be monitored this week: leading economic indicators (Empire Manufacturing and Philadelphia Fed), confidence among homebuilders (NAHB), housing starts, building permits, Fed minutes and manufacturing and services PMIs in the US; and trade balance, consumer confidence and manufacturing and services PMIs in the eurozone.

Swiss Market

To be monitored this week: FSO April producer and import prices, FSO Q1 property price index and FSO Q1 secondary sector sales, orders and production. The following companies are due to report results or figures: Orascom DH, Sonova, Julius Baer (four-month assets under management), Lem, Züblin, Dufry and Richemont.

Equities

AXA (Satellites): some parts of the group’s Asian operations were recently hit by a “targeted ransomware attack”. The perpetrators reportedly stole three terabytes of data from operations in Hong Kong, Malaysia, the Philippines and Thailand. Clients’ personal data was compromised in the attack.
FACEBOOK (US Core Holdings) is planning to launch a US stablecoin through its Diem Association as the group scales back its global ambitions and focuses on the US. The Association has withdrawn its application for a Swiss payment system licence and is relocating to the US.
MOWI (Core Holdings) is due to report its detailed Q1 2021 results this Wednesday. Preliminary numbers put EBIT at €109m, 24% ahead of expectations. With harvest volumes 8% above forecast and margins (EBIT per kilo of salmon) higher, the group is set to report on volume, price and profitability trends over the coming quarters.
Although WALT DISNEY (US Core Holdings) reported fairly strong results, the market was disappointed in the level of growth in streaming services (103.6m Disney+ subscribers vs. a consensus expectation of 109.3m). Other than that, demand for the group’s parks, hit hard by the pandemic, seems to be picking up.

Bonds

US inflation data came in much higher than expected both month on month (with the CPI up 0.8%, vs. 0.2% expected) and year on year (up 4.2%, vs. 3.6% expected), leading to high levels of volatility in interest rates, which ended the week higher in the US (with 10-year yields up 5 bps) and even more so in Europe (with 10-year Bund yields up 10 bps). Credit spreads widened slightly in the US and European high-yield segments (up 7 bps and 5 bps respectively). Nevertheless, thanks to their shorter duration, HY indices performed better than their IG counterparts, with performances of -0.19% (US) and -0.16% (Europe).

Sentiment of traders

Stock market
The correction was short-lived, with indices bouncing back to end the week at their initial support levels. With commodity prices rising, inflationary risk continued to weigh on equity markets. On the macro front, we expect US and European PMI data, US housing numbers and European GDP. The uptrend appears to be running out of steam in the short term.
Currencies
USD remains under pressure: EUR/USD 1.2138; USD/CHF 0.9016. Breaking through resistance at 1.2180 would give the EUR/USD pair an extra push towards 1.2245-1.2350; failing that, it will fall back towards support at 1.20. GBP has consolidated its gains: GBP/USD 1.4109; EUR/GBP 0.86. CHF is stable at EUR/CHF 1.0945. The Israel-Palestine conflict has pushed gold up to $1,853/oz; next support: $1,900. Our ranges – USD/CHF: supp. 0.8960 res. 0.9225; EUR/CHF: supp. 1.0858, res. 1.1160; GBP/USD: supp. 1.3822, res. 1.4340.

Today’s graph

Performances

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