Monday Report

Economy

US statistics were thin on the ground last week: pricing pressure continued, with the producer price index rising more sharply than expected in August (up 0.7% MoM; up 8.3% YoY), while job openings once again rose in July (to 10.93m). In the eurozone, although the Sentix index of investor confidence has fallen in September (from 22.2 to 19.6), this is within the range of expectations. Q2 GDP growth was revised upwards (from 2% to 2.2% QoQ; 14.3% YoY). Lastly, in China, foreign trade picked up, with exports and imports both accelerating faster than expected (up 25.6% and 33.1% YoY respectively).

Climate

Faced with growing fears of delays in the phasing-out of combustion engine cars, the UK Government has announced plans to introduce legislation sometime this year requiring all newly built homes and offices to be fitted with electric vehicle charging points. The legislation – a world first – will require the installation of smart charging points so that batteries can be recharged without destabilising the power grid.

Markets

Performance was a mixed bag last week: while equities tended to fall (with the MSCI World down 1.3% and the MSCI Emerging Markets down 0.5%), Japanese equities rose sharply (up 4.2%) on news of PM Yoshihide Suga’s impending departure. Copper also rose sharply, up 2.8%. Similarly, credit spreads narrowed while sovereign yields rose slightly. Both this and dollar appreciation (with the dollar index up 0.6%) hurt gold (down 2.1%). To be monitored this week: SME confidence (NFIB index), consumer confidence (Univ. of Michigan), CPI, retail sales and industrial production in the US; industrial production and trade balance in the eurozone; and retail sales, industrial production and investment in China.

Swiss Market

To be monitored this week: Flughafen Zürich August traffic and passenger statistics, FSO August producer and import prices, and SECO September economic forecasts. The following companies are due to report results: Helvetia, Lalique and Newron.

Equities

APPLE (US Core Holdings): a US federal judge issued a mixed verdict in the antitrust battle between Epic Games and Apple. The platforms’ economics (App Store and fees of 15-30%) could change significantly after the judge’s ruling, which denied Epic the right to offer app downloads outside the App Store but required Apple to allow for the possibility of payments being made outside the Apple ecosystem.
INDITEX (Core Holdings) is due to report its Q2 2021 (May-July) results this Wednesday. These are expected to show a sharp recovery (with sales up 50% LFL and up 7% vs. Q2 2019 and EBIT up 11% vs. Q2 2019) and margin uplifts. The desire to consume combined with the reopening of stores triggered a recovery in European retail over the summer – a trend that should be confirmed by the group’s trading update covering the first half of Q3 (August-October).
ROCHE (Core Holdings) last week announced that it is to acquire TIB Molbiol Group. The acquisition will strengthen its portfolio in the development of diagnostic tests for emerging infectious diseases. The two companies have been working together for over 20 years to quickly provide testing solutions during critical periods (Covid-19, SARS, MERS, Ebola, etc.). The financial terms of the deal have not been disclosed.

Bonds

The event of the week was the announcement by the ECB that it would be slowing the pace of purchases under its Pandemic Emergency Purchase Programme from €80bn to €60-70bn a month. At the same time, the ECB revised up its inflation forecasts for 2022 (up 20 bps to 1.7%) and 2023 (up 10 bps to 1.50%). Core yields ended the week slightly higher (with the 10-year Bund yield up 3 bps), driven by inflation expectations. It was a good week for credit: spreads narrowed across all categories, with high-yield leading the way in both Europe (down 3 bps) and the US (down 2 bps).

Sentiment of traders

Stock market
Will the 50-day moving average once again – for the eighth time this year – act as a support for the S&P? We’ll know for sure when the US CPI is released on Tuesday. Runaway inflation or contained inflation? Tapering or not tapering? Despite a fairly positive start, things could get a bit more turbulent later in the week.
Currencies
Following last Thursday’s ECB press conference, EUR is trending downwards: EUR/USD 1.1778. Breaking through support at EUR/USD 1.1740 would confirm this trend; otherwise, the pair will probably return to around 1.1830. Buoyed by risk aversion, USD has bounced back to USD/CHF 0.9212; upcoming resistance: 0.9250. GBP has stabilised at around GBP/CHF 1.27 and GBP/USD 1.3790. Gold is trading at $1,787/oz.

Today’s graph

Performances

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