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Monday Report
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Economy
The statistics published in the United States were disappointing overall. The ISM manufacturing index did rise from 46.8 to 47.2, but less than expected (47.5) and remained in contraction (<50) in August. Its services counterpart nevertheless posted a higher reading (51.5). Job creation in particular (142,000 in August) disappointed expectations (165,000), and revisions to previous months were also negative (-86,000). In the eurozone, the composition of GDP growth in Q2 (+0.2% q/q) disappointed (consumption: -0.1%; investment: -2.2% and government: +0.6%), as did retail sales in July (+0.1% m/m; -0.1% y/y). Finally, in China, the manufacturing PMI (Caixin) rose more than expected (from 49.8 to 50.4), but the services PMI disappointed, falling from 52.1 to 51.6.
Planetary Limits
According to a report by the World Resources Institute in August 2023, 25 countries, or a quarter of the world's population (and a billion more people by 2050), are facing extremely high water stress. The risk of water-related incidents is increasing accordingly: according to Control Risks, a risk management consultancy, the number of water-related incidents (war, acts of terrorism, public unrest, demonstrations) will rise from 23 per month in 2019 to 75 in 2024 at global level.
Markets
Risk-off week following weak economic figures. Sovereign 10-year yields fell sharply (USD: -20bp; EUR: -12/-14bp) and equities fell (US: -4.3%; Europe: -3.5%; emerging markets: -2.3%). The dollar index depreciated (-0.5%), allowing gold to rise by 0.4%, also supported by the fall in interest rates. Oil prices collapsed (-9.2%) on fears of renewed production by OPEC countries. Coming up this week: SME confidence index (NFIB), consumer and producer price indices and household confidence index (Univ. of Michigan) in the United States; Sentix investor confidence index, ECB meeting and industrial production in the eurozone; consumer and producer price indices, foreign exchange reserves and monetary aggregates in China.
Swiss Market
Coming up this week: Confederation loans (SNB), August air traffic statistics (Flughafen Zürich) and Swiss Re's press release on the occasion of the Monte Carlo Conference's 'Rendez-Vous de Septembre'. The following companies are due to release their H1 results: BVZ, MCH, Mobiliar, Baloise (H1 results and Investor Day) and Santhera.
Equities
ASTRAZENECA (Core Holdings): analysis of data published last year evaluating the antibody-drug conjugate Dato-DXd in lung cancer (one of the Group’s growth drivers), using a computerized approach to pathology, has enabled better identification of patients responding to treatment. This analysis will help to improve patient selection, but it also confirms that the target population will be smaller than initially expected, now estimated at 40% of lung cancer cases.
Luxury Goods sector – LVMH and HERMES (Core Holdings): initial indications point to difficult trading in July-August, penalized mainly by a sharper decline in China. Although the basis for comparison improves from the second half of the year onwards, business looks set to remain weak over the coming quarters. We are lowering our organic growth forecasts for the sector in 2025 from 8% towards 5%.
Bonds
US employment continues to show signs of deterioration, with job creation once again below expectations. Rates ended sharply lower (2Y -27bp/10Y -20bp) and the terminal rate is now expected to be 2.89% (vs 3.09). Governor Waller's comments suggest that the Fed should start with a 25bp cut next week, before possibly adjusting by 50bp at future meetings. In Europe, yields reacted less strongly (10Y Bund -13bp), pushing the 10Y UST-Bund spread to a new low over 1Y (153bp).
Sentiment of traders
Stock markets
The markets were attempting to bounce back at the opening after a bloody week. On the micro side, Apple will present the iPhone 16 this evening, Dell and Palantir will join the S&P500, and on Tuesday evening we will have the Harris-Trump debate. On the macro front, CPI and PPI figures will be published in the US, while in the eurozone, all eyes will be on the ECB, which is expected to cut rates by 25bp. We remain cautious over the medium term.
Currencies
Expectations of an ECB rate cut and the political turmoil in France continue to weigh on the € despite disappointing US employment figures: €/$ 1.1059, a break of sup. 1.1020 would open the way to sup. 1.0950, res. 1.1200 remains valid. The $/CHF is stagnating at 0.8468, sup. 0.8350 res. 0.8530. The rise in the CHF is slowing to €/CHF 0.9365, sup. 0.9305 res. 0.9460. The £ is down at £/$ 1.3102, a test of sup. 1.3025 is possible, res. 1.3200. Ounce of gold is trading at $2494/oz, sup. 2450 res. 2531.
Today’s graph
Performances
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