Weekly Market Update by Thomas Veillet – 09/12

Thomas Veillet, a recognized specialist in the world of finance and renowned evangelist, deciphers the weekly financial news. halfway point.
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When my friend Christine follows in Jerome’s footsteps

Looking at the weekly performance table, we can quickly see that the week was perfect, with all asset classes rising and all stock market indices showing more or less spectacular gains. The index he surged over 9% (I’m talking about Bitcoin) and the only thing that fell was oil, which is definitely good news. According to Powell, things are going well, apparently. It’s hard to believe that it works so quickly and for the first time.

Finally, it’s especially me who finds it hard to believe…

However, the past week has not been easy for the market. Thinking back on the events of the last few days, it makes me wonder how they managed to get 4% on the Nasdaq, 2.6% on the DAX, and almost 2% on the CAC.

There are clearly two reasons for this.

first one : The fact that the index held and investors suddenly thought ‘raising interest rates to fight inflation was a good thing’ – better than the last time we spoke at the Jackson Hole Symposium. Same words, same situation, but different interpretations. In addition to that, the market has goldfish memories and explanations.

Second : The fact that the dollar crashed last week and the great investment world suddenly realized that a weak dollar was too cool for American exporters.

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dollar crash

If you read the financial media this weekend, you’ll be told that the dollar’s depreciation has completely changed investors’ outlook. Yes indeed, the dollar fell 2.5% against the euro, all in four days. very!

Nevertheless, it must be said that the euro has fallen 14% year-to-date against the dollar. But now, apparently, it changes everything. For Wall Street pundits in the visibly dark, this massive collapse of the dollar seems to justify a return to a wholly unprecedented risk appetite.

energy inflation

Energy inflation is already severe and impacting economic growth. The average German household now pays about 13 times more electricity than it did in January 2020. That’s about $38,000 compared to his $3,000 pre-Covid.

Yes, we have price caps and subsidies, but the latter is a double-edged sword. said it would spend at least $65 billion on This is her third aid related to the energy crisis and totals about $100 billion at a time when consumer prices in Europe are rising more than 9% a year.

With a European recession looking inevitable, the ECB will likely continue to raise interest rates and a debt crisis is unlikely. Some of this bad news is widely believed not to have been priced into stocks in the region. So there is an opportunity for patient investors. In contrast, US assets are becoming less attractive to foreign investors. This is due to higher currency hedging costs, converging inflation-adjusted interest rates, and lower Fed bond purchases.

Fed policy remains a key concern for US investors. But ignoring other dynamics is unwise, especially in Europe, and can be costly.

See below for this week.

  1. ICC and PPI

A number of August Consumer Price Index (CPI) reports are out this week. India releases his CPI report on Monday, Germany, Spain and the US on Tuesday, the UK on Wednesday, France on Thursday and Italy and the entire Eurozone on Friday.

Producer Price Index (PPI) reports are also due from Japan, Switzerland (Tuesday), the UK (Wednesday) and the US.

The ECB has already made its final decision, raising interest rates by 75 basis points last week. The Fed needs to stick to rate hikes of at least 50 basis points, possibly 75 basis points, and the inflation report won’t shake that, but Jerome He welcomes signs that Fed Chairman Powell will ease inflation at least significantly. There is no doubt about that.

  1. two important publications

There are two major software companies that have published notable results.

Software giant Oracle is expected to post 4% growth in first-quarter revenue, including its latest acquisition Cerner, to report results after the close of trading on Monday. Similarly, Oracle is adapting to a tougher macro environment as it reportedly begins layoffs. Therefore, reports and conference calls on the results are likely to be revealed.

Adobe will report earnings after the market closes on Thursday. The company is expected to post profit growth of 7.3% and sales of 12.6%. The company was disappointed by its last report, but the stock has since recovered.

  1. Russia and Ukraine

Russia continues to increase economic pressure on Europe with the closure of the Nord Stream 1 gas pipeline. The energy situation before the arrival of winter, and what makes the inflation report I mentioned at the beginning of the article more relevant.

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