Monday Report

Economy

US statistics were a mixed bag: SME confidence (NFIB) held steady in April at 93.2 but consumer confidence (Univ. of Michigan) has fallen sharply in May (from 65.2 to 59.1). Consumer price inflation, higher than expected in April (0.3% MoM) but slightly slower year on year (down from 8.5% to 8.3%), and producer price inflation (0.5% MoM; 11% YoY) confirmed pressure on prices. In the eurozone, investor confidence (Sentix) declined in May (from -18 to -22.6) while industrial production contracted 1.8% MoM in March (down 0.8% YoY). In China, producer and consumer price inflation came in higher than expected in April, at 8% and 2.1% YoY respectively, while industrial production (down 2.9% YoY) and retail sales (down 11.1% YoY) were disappointing, hit by lockdowns.

Climate

According to an International Energy Agency report, installations of renewable energy capacity are set to reach a record high of 320 GW in 2022, compared with 295 GW in 2021, with solar accounting for 60%, followed by wind and hydropower. The IEA expects the market for new solar capacity to exceed 200 GW in 2023. Lastly, China is set to overtake Europe for installed offshore wind capacity by the end of 2022.

Markets

Last week was a risk-off week: developed sovereign yields fell sharply (down 21 bps in the US and between 19 and 30 bps in Europe), generating gains of 1.7-2.9%, emerging and high-yield spreads widened (with the global index down 1.2%), the dollar rose (up 0.9%) and equities lost ground (down 2.1% in developed markets, 2.5% in the US and 2.6% in emerging markets)… not to mention the collapse of cryptoassets. To be monitored this week: regional leading economic indicators (Empire Manufacturing and Philadelphia Fed), retail sales, industrial production, confidence among homebuilders (NAHB) and housing starts in the US; and trade balance and consumer confidence in the eurozone. In China, all eyes will be on the effects of the cut in minimum mortgage rates for first-time buyers.

Swiss Market

To be monitored this week: FSO April overnight hotel stays, FSO Q1 property price index and FSO Q1 industrial production. The following companies are due to report results: LM Group, ObsEva, Sonova, Orascom DH, Dufry, Julius Baer, SoftwareONE and Richemont.

Equities

DISNEY (Core Holdings) has reported poorer than expected Q2 results. The CEO said Disney+ is on track to hit its target of 230-260m subscribers by 2024. However, overseas streaming services (Asia) will struggle to turn profitable. Next quarter’s operating profit could once again be hit by park closures in Asia.
EURONEXT (Satellites) is due to report its Q1 results tomorrow after the close. Volumes are expected to have risen year on year and we expect reassuring news on synergies from the Borsa Italiana integration.
EVONIK (Satellites) held an investor day last week. The company continues to refocus its portfolio around higher-added-value businesses, announcing plans to sell off its Performance Materials business unit in 2023. Its medium-term organic growth target (excluding Performance Materials) has been upgraded from 3% to 4%, reflecting the trend observed over the past few years. EBITDA margin guidance is unchanged at 18-20%.
WALMART (Satellites) is due to report its Q1 results tomorrow evening. While the market appears confident that the group will have been able to deliver a solid first-quarter performance, these results will mainly serve as an indication of how low-income US consumers have been responding to rising prices.

Bonds

In the US, despite core inflation running higher than expected in April (at 0.6%, vs. 0.4% expected), yields ended the week lower (with 10-year yields down 21 bps) on the back of mounting concerns about growth. In Europe, a number of ECB officials said they were in favour of an initial rate hike in July but the risk-averse environment also drove sovereign yields downwards (with the 10-year Bund yield down 20 bps). In credit, spreads widened across all categories in both Europe (IG: +6 bps; HY: +28 bps) and the US (IG: +8 bps; HY: +52 bps).

Sentiment of traders

Stock markets
Chinese April retail sales (down 11.1%) broke Friday’s upward momentum, which failed to prevent a sixth consecutive week of falls on Wall Street. Also on the macro front, this week will bring US industrial production and housing numbers and EU unemployment, GDP and CPI. With global growth flagging, the downward slide could resume at any time.
Currencies
The geopolitical situation and the interest rate differential continue to hamper EUR, which has not managed to bounce back: EUR/USD 1.0406. Breaking through support at 1.0340 would open the way towards EUR/USD parity; otherwise, the pair could bounce back to 1.0640. USD continues to rise: USD/CHF 1.0034; GBP/USD 1.2225. Our ranges – USD/CHF: 0.97-1.0237; GBP/USD: 1.20-1.2410. Gold is trading at $1,808/oz; supp. $1,780/oz; res. $1,910/oz.

Today’s graph

Performances

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insights

Read the latest weekly report on the financial sectors and financial …
A brief recap of the market’s past week, by Bordier Singapore
Read the latest weekly report on the financial sectors and financial …
A brief recap of the market’s past week, by Bordier Singapore

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