Monday Report

Economy

US statistics were somewhat disappointing. SME confidence (NFIB) fell from 99.1 to 98.2 in October, whereas it had been expected to rise, while consumer confidence (Univ. of Michigan) deteriorated from 71.7 to 66.8 in November. Consumer price inflation continued to quicken, with prices up 0.9% MoM and 6.2% YoY. In the eurozone, the Sentix indicator of investor confidence surprised to the upside in November, up from 16.9 to 18.3, as did the ZEW indicator, up from 21 to 25.9. Lastly, Chinese numbers were reassuring with the exception of slightly disappointing investment (up 6.1% YoY): both retail sales (up 4.3% YoY) and industrial production (up 3.5% YoY) came in higher than expected in October.

Climate

According to Goldman Sachs, the cost of capital for financing fossil fuels has risen since 2011. For example, the cost of capital for offshore oil projects has risen from c. 11% in 2011 to c. 22% in 2020; meanwhile, for renewable energy projects, it has fallen from c. 9% in 2010 to 5% in 2020. In our opinion, pressure on fossil fuel financing will only prolong this trend: in practice, markets are doing their job in this area.

Markets

Quickening US inflation pushed up sovereign yields (US: up 11 bps; UK/CHF/EUR: up c. 3-5 bps) without inflicting too much pain on equities (down 0.2% in developed markets and up 1.7% in emerging markets) or the bond segment of credit markets. Gold (up 2.9%) benefited from inflationary fears despite the strong dollar (with the dollar index up 0.9%). To be monitored this week: retail sales, leading economic indicators (Empire Manufacturing and Kansas and Philadelphia Feds), confidence among homebuilders (NAHB), building permits and housing starts in the US; trade balance and new vehicle registrations in the eurozone.

Swiss Market

To be monitored this week: FSO Q3 property price index, FCA October foreign trade/watch exports and FSO Q3 secondary sector sales, orders and production. The following companies are due to report results: Sonova, Orascom DH and Klingelnberg. Lastly, Comet, Dormakaba and Allreal are due to hold investor days.

Equities

BECTON, DICKINSON & CO (US Satellites) updated its 2025 guidance (at constant exchange rates) on Friday: sales and EPS growth of 5.5% and over 10% per year respectively. Management execution will be key to any re-rating of the share price, and the FDA’s decision on the resumption of sales of Alaris infusion pumps will be an important first step in 2022.
DORMAKABA (Core Holdings): at its investor day, the group set out full-year organic growth guidance of 3-5% from 2021-22 as well as guiding for an EBITDA margin of 16-18% and return on capital employed of 30% with effect from 2023-24. These figures are consistent with our projections and translate into a fundamental value of CHF 790 per share.
SONOVA (Core Holdings) this morning reported strong H1 results, with sales and EBITA 2% and 5% ahead of expectations respectively. The group confirmed its 2021/22 guidance at constant exchange rates (sales growth of 24-28% and adjusted EBITA growth of 34-42%) including the effects of supply constraints and cost inflation.

Bonds

US inflation expectations rose after inflation numbers came in higher than expected, while 10-year yields ended the week 11 bps higher at 1.56%. In credit, spreads were unchanged in the US, whereas in Europe, they widened in IG (+4 bps) and narrowed in HY (−3 bps). As regards performance, HY outperformed in both Europe (+0.05%, vs. −0.32% for IG) and the US (−0.13%, vs. −0.92% for IG).

Sentiment of traders

Stock market
US inflation and consumer confidence got the better of equity markets, putting paid to the prospect of a fifth consecutive week of gains. As results season draws to a close, we will be looking out for quarterly results from Walmart, Home Depot and Cisco. On the macro front, this week will bring retail sales, industrial production and housing starts. We remain positive for the time being.

Currencies
USD has quickly strengthened to EUR/USD 1.1450; upcoming support: EUR/USD 1.1375. GBP remains under pressure at GBP/USD 1.3417. US/China tensions over Taiwan, the migration crisis at the Polish border and the resurgence of Covid infections in Europe all support CHF: EUR/CHF 1.0530; upcoming support: EUR/CHF 1.05. Gold has climbed to $1,863/oz.

Today’s graph

Performances

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