In the euro zone, EC confidence indices fell in September. In China, the purchasing managers’ indices for manufacturing and services are expanding.
In the United States, published statistics continue to paint a mixed picture. Good news includes the recovery in household confidence (from 103.6 to 108) as well as the Richmond Fed leading indicator (from -8 to 0). Disappointments can be found in the Dallas Fed indicator (from -12.9 to -17.2) and the Chicago Fed indicator (from 52.2 to 45.7) in September. House prices fell slightly in July (-0.6%) while the core PCE price index accelerated (+0.6%mom, +4.9%mom). In the euro zone, EC confidence indices fell in September: business (from 97.3 to 93.7), industry (from 1 to -0.4) and services (from 8.1 to 4.9). Finally, in China, September manufacturing and services PMIs expanded: the first rose to 50.1 from 49.4, while the second fell to 50.6 from 52.6.
According to consulting firm Redington’s 2022 report, which covers 122 wealth managers, 232 investment strategies and $37.7 trillion in assets under management, only 57% of management firms have an established exit strategy for stocks that are ESG-performing negatively. Only 43% can cite an example of ESG-driven stock selling in the past year, compared to 39% a year ago.
The week was marked by the BoE’s announcement that it would buy government bonds with longer maturities, in particular to ensure the solvency of pension funds. Gilts rates rose nonetheless (5Y +32bp/ 10Y +26bp). On the continent, German inflation continued to surprise unfavorably (1.9% vs. 1.5% exp) and long-term rates have risen (10-year Bunds +10bps; 30-years +22bps). High interest rate volatility spread to credit with widening spreads on IG (EU +14bps/US +19bps) and HY (EU +58bps/US +47bps).
The end of the quarter did not allow markets to recover and indices opened to close this morning in the red. This week we are waiting for the PMIs in Europe, the ISM and most importantly the employment statistics in the US. Caution remains to be exercised while awaiting the official start of the quarterly earnings season.
The $ consolidates and starts the week slightly higher: €/$ 0.9810, $/CHF 0.9870; We expect the following ranges: €/$ 0.9530-1.0051 and $/CHF 0.9620-1.0066. The CHF suffered profit taking at €/CHF 0.9685. Until the 0.9747 resistance is broken, we stay bearish on the €/CHF, the sup. 0.9411 remains valid. The £ recovers to £/$1.1204 after last week’s collapse, the resolution. 1.1409 must be broken otherwise a return to sup. 1.0760 is likely. An ounce of gold is $1662, sup. 1615 res. 1687.
The continued rise in 10-year government bond yields (USD: +10bps; EUR: +10bps) due to inflationary pressures weighs on risk appetite. In the UK, delays by the government and the BoE led to a 26bps rate recovery. Equities fell (US: -2.9%; Europe: -0.7%; EM: -3.3%) and credit spreads widened, including in IG. Gold (+1.8%) and other commodities (oil: +2.9%; copper: +2.2%) benefited from the fall in the dollar (dollar index: -1%). To monitor this week: ISM Manufacturing and Services and Employment Report in the United States; Producer price index and retail sales in the euro area; Foreign exchange reserves in China.
To be monitored this week: OFS September Inflation, September Purchasing Managers’ Indices, KOF Autumn Economic Forecasts, September Unemployment (Seco) and End September FX Reserves (BNS). Aryzta will publish its 2021/22 results, Sika will hold an investor day and Accelleron will go public (IPO).
DIAGEO (Core Holding) will hold its Annual General Meeting next Thursday. The latest Nielsen statistics (Europe and US) show buoyant spirits markets in Q3 2022, a situation confirmed by Pernod Ricard. GBP weakness supports Diageo’s sales and earnings growth. So many points to be detailed during the GA.
ENERGY: According to Reuters, OPEC would consider a production cut of at least 1 mb/d at its meeting on Wednesday. The Russian Gazprom announced at the end of the week that it would stop its gas deliveries to Italy due to “regulatory changes in the transit country Austria”. The lull in the energy supply is not for today…
MOWI (Removed from Core Holdings list): Barring an unexpected tax proposal from the Norwegian government clouding earnings growth prospects for 2023 (-20%), the boom phase for the salmon industry could end next year. While prices are likely to remain high on moderate supply, premium food demand is likely to suffer from a geopolitical/economic context in Europe that tends not to favor a consumer who has become more sensitive to rising energy costs.
TSMC (Satellite) is increasing prices for all of its customers, including Apple and Nvidia, according to media citing TSMC customers. The surge begins as early as January 1, 2023 and is expected to bring in TSMC up to $10 billion. Apple would negotiate not to pay higher prices.
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