Monday Report

Economy

US statistics were once again a mixed bag: the Empire Manufacturing (NYC) leading indicator fell further than expected in October (from -1.5 to -9.1) and the housing sector continued to slide, with confidence among homebuilders (NAHB index) falling more sharply than expected in October (from 46 to 38) while housing starts declined 8.1% MoM and building permits picked up very slightly (up 1.4% MoM) in September. Meanwhile, industrial production surprised to the upside in September, up 0.4% MoM. In the eurozone, the ZEW confidence indicator remained weak in October at 59.7 (up 1 point MoM). Lastly, there were no surprises in China: one-year loan prime rates are unchanged at 2.75%… and the Party Congress re-elected Xi Jinping for a third term.

Planetary Limits

Iceland, Denmark and the Netherlands have secured the top three spots in the 2022 Green Future Index, published by MIT Technology Review. The index uses five criteria to measure the degree to which countries are pivoting towards a sustainable, low-carbon future: carbon emissions, energy transition, green society, clean innovation and climate policy. The UK is ranked 4th, France 7th, Switzerland 14th, the US 21st and Singapore 29th.

Markets

It was a risk-on week in markets: equities rallied strongly (up 4.8% in the US, 1.3% in Europe and 0.2% in emerging markets), as did commodities (with oil up 1.9% and copper 0.9%) and high-yield bonds (up 0.1%), while gold lost ground (down 0.3%), as did the dollar (down 1.1%) and sovereign bonds (down by between 0.6% and 1.6%), with long yields up as much as 20 bps in the US. The exception, thanks to Liz Truss’s resignation, was UK gilt yields. To be monitored this week: manufacturing and services PMIs, home prices, consumer confidence, Q3 GDP, leading indicators (Richmond and Kansas City Feds) and PCE inflation in the US; manufacturing and services PMIs, ECB meeting and EC confidence indicators in the eurozone; and trade balance, Q3 GDP, retail sales, investment and industrial production in China.

Swiss Market

To be monitored this week: KOF October economic barometer. The following companies are due to release figures: Huber+Suhner, Logitech, Kühne+Nagel, UBS, Idorsia, Novartis, Sulzer, Bucher, Credit Suisse, Clariant, Landis+Gyr, Swisscom, Molecular Partners, Holcim, Luzerner Kantonalbank, SIG Group and Swiss Re.

Equities

ACCOR (Satellites) will this Wednesday report Q3 sales buoyed by a strong recovery in French and European RevPAR over the summer (tourism + resumption of business travel + trade shows). The recent upgrade to the group’s full-year EBITDA guidance reassures us as to the prospect of a strong end to the year, though the horizon could darken in 2023: a recession in Europe would hinder the recovery in the hotel sector.
ASML (Satellites) has reported stronger than expected quarterly results, mainly thanks to early acceptance/approval of EUV machines by some customers (with delayed revenue recognition reduced to €2.2bn, vs. €2.8bn projected initially). Furthermore, ASML has apparently been spared by the US ban on exporting DUV machines to China, reassuring the market for the time being.
FREEPORT-MCMORAN (Satellites): the company’s Q3 results reflect lower copper prices and cost inflation but are nevertheless in line with expectations. Given the prevailing uncertainty, the share buyback programme has been put on hold and will depend on market trends and future cash flows. However, management has emphasised that financial markets are decorrelated from the physical copper market, pointing out that demand is solid at present and global stocks are low and continuing to trend downwards.

Bonds

The US sovereign yield curve steepened, with markets believing the fed funds rate will have to stay higher for longer: two-year yields fell 2 bps over the week, while 10-year yields climbed 20 bps. In Europe, yields continued to rise (with the 10-year Bund up 7 bps) ahead of this Thursday’s ECB meeting, which the market expects to culminate in a 75 bps rate hike. In credit, spreads ended the week slightly wider in Europe (IG: +7 bps; HY: +7 bps) but narrowed in the US (IG: -2 bps; HY: -17 bps).

Sentiment of traders

Stock market
After a positive week, indices opened in the black except in Hong Kong and Shanghai (down 6.1% and 2.9%), which in their own way celebrated Xi Jinping’s third term. This week is set to be busy, with results due from nearly 400 companies, an ECB meeting (0.75% rate hike expected) and, in the US, PCE inflation, durable goods and housing numbers. The rally should continue.
Currencies
After rising strongly last week to reach a 32-year high against JPY (USD/JPY: 152.16), USD was stopped in its tracks after the BoJ intervened, triggering a correction against all currencies. This morning, USD is trading at EUR/USD 0.9852, USD/CHF 0.9978 and USD/JPY 148.9. EUR is benefiting from expectations of a big rate hike this week. We anticipate the following ranges – EUR/USD: 0.9725-1.00; USD/CHF: 0.9780-1.0076; EUR/CHF: 0.9643-1.0000; GBP/USD: 1.0925-1.1496.

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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