Monday Report


US statistics were something of a mixed bag. Among the positive surprises was the housing sector, with confidence among homebuilders rising from 75 to 76 in September, while housing starts were up 3.9% MoM and building permits 6% MoM in August. Conversely, the manufacturing PMI fell slightly further than expected in September (from 61.1 to 60.5), as did its services counterpart (down from 55.1 to 54.4) and the Kansas City Fed index (down from 29 to 22). In the eurozone, September manufacturing and services PMIs also fell short of expectations, down from 61.4 to 58.7 and from 59 to 56.3 respectively. Consumer confidence recovered in September, up from -5.3 to -4. In China, one- and five-year borrowing rates remained unchanged pending the authorities’ response to the Evergrande affair.


The results of the ECB’s climate stress test on four million businesses worldwide and 1,600 European banks show that the costs of transition pale in comparison with the economic costs of unfettered climate change out to 2050. A “do nothing” scenario would result in a 10% decline in GDP and a 30% increase in defaults among those businesses most exposed to climate change.


The one surprise from last week’s Fed meeting was news that the Fed plans to halt its asset purchases from mid-2022 (with tapering set to begin in November). US 10-year sovereign yields rose 9 bps on the news, while their European counterparts rose 5-7 bps. The dollar held steady (up 0.1%), as did gold (down 0.1%). Despite rising equity volatility, shares gained 0.3% in Europe and 0.5% in the US while losing 1% in emerging markets. To be monitored this week: durable goods orders, home prices (FHFA and S&P CoreLogic), consumer confidence and ISM Manufacturing Index in the US; M3 growth, EC confidence indicators (economy, consumers, services), unemployment rate and CPI in the eurozone; and manufacturing and services PMIs in China.

Swiss Market

To be monitored this week: KOF consensus forecast and September economic barometer, SNB Q2 forex market intervention volumes, and September PMIs. Meanwhile, the following companies are due to report their H1 results: Achiko, Perfect Holding, Wisekey and Zwahlen & Mayr.


ASTRAZENECA and MERCK & CO (Core Holdings) last Friday announced the success of their trial evaluating Lynparza as a first-line treatment for prostate cancer, with positive results across the entire population and not just in patients with homologous recombination repair gene mutations. Depending on detailed data to be disclosed at a later date, the indication represents an opportunity of up to $4bn.
DISNEY (US Core Holdings) expects to see a slowdown in the number of new Disney+ subscribers. Management is now forecasting between 1 and 3 million new subscribers in 2021 (vs. initial analyst estimates of 10 million).
FEDEX posted lower profits in its fiscal Q1 despite higher sales, reflecting the difficulty of passing on wage and cost inflation (notably in connection with rising fuel prices)… which is looking less and less temporary. We are removing the share from our recommendations.
SALESFORCE (US Satellites) has upgraded its FY 2022 revenue forecasts and is now targeting $26.25-26.35bn. Adoption of the hybrid working model continues to drive increased demand for Salesforce’s software.
UBS (Satellites): newspaper Les Échos reported on Friday afternoon that the Paris Court of Appeal was set to announce that it would be delaying its ruling on the UBS case – originally scheduled for today – until December. No official reason had been given as this document went to press.


At its last meeting, the Fed hinted that it would begin to taper its asset purchases in early November and continue to gradually wind them down until mid-2022. Yields rose in response over the following few days, causing the curve to steepen. US 10-year yields ended the week up 9 bps at 1.45%, mainly driven by rising real yields (up 10 bps). In credit, high-yield spreads were very volatile as a result of the Evergrande saga, though the impact on US and European high-yield remained moderate (up 2 bps and 11 bps respectively).

Sentiment of traders

Stock market
Indices recovered last week in defiance of Chinese real estate risk and the German elections. Equity markets were up at the open this morning and look set to reach the quarter-end without incident. The focus this week will be on durable goods orders and the ISM Manufacturing Index in the US and unemployment in the eurozone.
The dollar gained ground on the back of Jay Powell’s announcement that tapering would begin in November 2021 but failed to break through support at EUR/USD 1.1680, trading at 1.1720 this morning. CHF has regained its safe haven status: USD/CHF 0.9260; EUR/CHF 1.0850; GBP/CHF 1.2660. Our ranges: EUR/USD 1.1650-1.1840; USD/CHF 0.9150-0.9350. Gold is trading at $1,760/oz.

Today’s graph


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