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Monday Report
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Economy
The statistics published in the United States were somewhat mixed. Household confidence fell more than expected in August, from 105.6 to 98.7. Personal income growth also disappointed expectations of a 0.4% rise, rising by just 0.2% m/m in August. The decline in the manufacturing PMI in September, from 47.9 to 47, is also a disappointment. On the other hand, its services counterpart came as a pleasant surprise, falling only marginally from 55.7 to 55.4. Durable goods orders (unchanged m/m) were also better than expected (-2.6% m/m) in August. Finally, PCE core inflation was reassuring in August (+0.1% m/m vs +0.2% m/m expected). In the eurozone, the PMIs were disappointing: the manufacturing PMI fell from 45.8 to 44.8 and the services PMI from 52.9 to 50.5. In China, authorities announced monetary and fiscal stimulus measures.
Planetary Limits
Switzerland and Italy have redrawn their border across the Matterhorn, straddling the Zermatt region in Switzerland and the Aosta Valley in Italy. The Swiss authorities pointed out that "large sections of the border are defined by the watersheds or ridge lines of glaciers, nevé or eternal snow. These formations change as the glaciers melt". What would happen between two unfriendly countries?
Markets
Support measures in China, as well as accommodative messages and rate cuts from other central banks, including the SNB, were well received by the markets. As a result, equities rose (US: +0.6%; Europe: +2.7%; emerging markets: +6.2%). Sovereign 10-year yields fell excluding the US (EUR: -8bp; CHF: -10bp). The dollar depreciates by 0.3% (dollar index), pushing gold to new all-time highs (+1.3%). Coming up this week: ISM manufacturing and services and employment report in the United States; consumer and producer price index, unemployment rate in the eurozone; manufacturing and services PMI (official and Caixin) in China.
Swiss Market
Coming up this week: consensus forecasts (KOF), September economic barometer (KOF), Q2 foreign exchange intervention volume (SNB), August retail sales (FSO), July services sales (FSO), September PMI purchasing managers' index, September inflation (FSO), September unemployment (Seco) and August accommodation statistics (FSO). The following companies are due to release figures: Addex, Leclanché, Airesis and EPH.
Equities
TENCENT, BAIDU and ALIBABA (Satellite) are finally seeing a rebound following the stimulus announcements in China. Baidu, which has suffered from its exposure to advertising (57% of sales), could benefit from a significant recovery if China’s macroeconomic situation really improves. In the event of a return to a risk-off configuration, we prefer Tencent.
The US Department of Justice (DoJ) is taking legal action against VISA (Core Holdings), accusing it of maintaining an illegal monopoly in the debit card market. Given Visa’s willingness to defend itself, the legal process could extend over a long period, involving motions and possibly appeals. Visa may also propose an agreement on fees and certain practices.
Basic Resources sector: While we remain cautious on China in the medium term, given the structural challenges facing the country, the change in policy by the Chinese authorities, with the announcement of significant measures to support the economy, comes on top of the Fed’s rate cut, and represents support for the sector in the short term. This move comes at a time when sentiment was particularly low on mining stocks. We are adding ANGLO AMERICAN and RIO TINTO to our Satellite list in Europe, alongside FREEPORT-MCMORAN (Satellite) in the USA, in order to complete and diversify our recommendations in the sector.
Bonds
In the US, the PCE came in below expectations (0.1% m/m vs. 0.2% expected), confirming that inflation is heading towards the target. Interest rates remained broadly unchanged and are moving within a range reflecting "soft landing" estimates. In Europe, the eurozone's composite PMI contracted (48.9), while initial inflation estimates fell sharply (FR -1.2% m/m). This prompted the market to revise upwards the probability of a rate cut in October from 25% to 80%, and sovereign yields ended the week lower (10Y Bund -8bp/ BTP -10bp).
Sentiment of traders
Stock markets
The opening was mixed in Asia, with China up 8% on the back of aid to the real estate sector and Japan down 5% with the election of Ishiba as Prime Minister. Europe started in the red, with CPI, unemployment and PPI in focus this week, while in the US ISM and employment statistics will be published. Volatility is likely to be rife.
Currencies
Since the election of the new Prime Minister, the JPY has gained four figures against the $ at $/JPY 142.10, sup. 139.58 res. 146.49. The €/$ is consolidating at 1.1165, sup. 1.1069 res. 1.1276. The CHF is supported by geopolitical events in the Middle East at $/CHF 0.8416 and €/CHF 0.9395. We anticipate the following ranges: €/CHF 0.9307-0.9508 and $/CHF 0.8333-0.8530. The uptrend in the pound continues at £/$ 1.3380, sup. 1.3313 res. 1.3450. Gold is trading at $2658/oz, sup. 2613 res. 2700.
Today’s graph
Performances
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