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Economy
In the US, annualized GDP growth of 2.8% in Q3 vs. 2.9% expected and 3% in Q2; in October, jobs creation (NFP) at 12,000, well below the 100,000 expected, unemployment rate stable at 4.1%; ISM manufacturing at 46.5 (-0.7 pt m/m) vs. 47.6 expected. On the other hand, consumer confidence rebounded to 108.7 in October from 99.2 expected. Core-PCE inflation was 2.7% y/y in September, above the 2.6% expected. In Europe, Q3 GDP growth came in at +0.4% q/q vs. 0.2% expected, but the confidence indices deteriorated in the economy from 96.3 to 95.6 vs. 96.3 est. and in industry from -11 to -13 (vs. -10.5 est.) in October. Consumer prices disappointed slightly: +2% y/y (+0.3 pt% m/m) vs. 1.9% expected. In China, the official PMI indices recover modestly: manufacturing at 50.1 (+0.3) and services at 50.2 (+0.2).
Planetary Limits
According to the latest World Energy Outlook from the International Energy Agency, electricity demand is set to grow 6x faster than global energy demand between 2023 and 2035. This is a very sharp acceleration compared with a ratio of 2x over 2010-2023 and 1.4x over 2000-2010. The electrification of the economy, a prerequisite for decarbonization, is underway, and will be reinforced by the additional demand expected from data centers.
Markets
Despite disappointing US economic figures, markets seem to be expecting Trump to win the election: US 10-year yields rise 14bp to 4.35% (~+11bp in EUR to 2.4%), with equities marking time (-1.3%) in a week buffeted by quarterly reports, particularly from Big Tech. Elsewhere, equities fell by 1.5% in Europe and by 1.1% in emerging markets. The dollar index and gold were unchanged over the week. Coming up this week: US elections, ISM services, Fed meeting and household confidence (Univ. of Michigan) in the United States; Sentix investor confidence index, producer price index and retail sales in the eurozone; producer and consumer price index, imports and exports, as well as possible new stimulus measures in China.
Swiss Market
Coming up this week: accommodation statistics for September (FSO), Q3 house price index (FSO), October unemployment (Seco), economic survey (KOF), foreign exchange reserves at the end of October (SNB) and consumer sentiment, October survey (Seco). The following companies are due to release figures: Burckhardt, Oerlikon, Adecco, Aluflexpack, Barry Callebaut, Lastminute, Zurich Insurance, Financière Tradition, PEH, Valiant, AMS Osram and Richemont.
Equities
ANGLO AMERICAN (Satellite) has sold its 33% stake in the Jellinbah metallurgical coal mine for $1.1 billion, giving an EV/EBITDA of 3.3x. The news is positive, with an amount higher than expected. This move will facilitate the metallurgical coal assets sale.
BYD (Satellite) sold 502,657 “New Energy Vehicles”, i.e. electric and hybrid vehicles, in October: an increase of 66.2% y/y.
We are removing KRAFT HEINZ from the Satellite list: the recovery is struggling to materialize. The rise in consumption seen during the pandemic has proved temporary, while structural challenges persist, making targets for 2025 unrealistic.
MERCK & CO removed from the Core Holdings list. Gardasil (HPV vaccine) will continue to be a drag on growth in Q4 and in 2025, due to destocking and increased competition in China. In addition, clinical news flow will be relatively limited over the coming year. The stock price is likely to remain dead-money over the next 12 months.
The loss of confidence in SOFTWAREONE (Swiss Convictions) is significant. The quarterly results and adjusted financial targets confirm this. As a result, we are removing SoftwareOne from our recommendation list.
Bonds
In the US, several employment data disappointed, notably JOLTS and jobs creation (12k vs 100k expected). Rates nevertheless ended sharply higher (2Y +10bp/10Y +14bp). Much of the movement, following the jobs report, leads us to believe that market is anticipating a Trump victory, and investors have "de-risked" just a few days before the election. In Europe, yields rose (10Y Bund +11bp/BTP +17bp), driven both by higher-than-expected inflation (2% vs 1.9%) and by the violent rise in UK yields (10Y +21bp) following the budget release.
Sentiment of traders
Stock markets
The coming week will finally see who will be the 47th US President, and this should generate volatility and overshadow the various macro (durable goods, ISM) and micro data releases. Only the Fed and BOE meetings on Thursday are likely to arouse interest, with both institutions expected to cut their respective rates by 25bp.
Currencies
In a week full of possibilities, punctuated by the US elections, we remain cautious, as volatility could be very high. The NFP figures (distorted by the hurricanes) and this morning’s polls showing K.Harris as the winner have caused the dollar to fall: €/$ 1.0895, $/CHF 0.8646. The Fed meets this week, and a 0.25% drop is expected. We expect the following ranges: €/$ 1.0600-1.1200, $/CHF 0.8560-0.8750. Following the Swiss inflation figures, the CHF weakens: €/CHF 0.9420, sup. 0.9340 res. 0.9500. The ounce of gold consolidates at $2737/oz, sup. $2700 res. $2800.
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Performances
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