The week that just ended was characterized by a significant volatility for financial markets, with bond yields and stock markets falling sharply, before bouncing back. Volatility fueled by a report onemployment in the United Statesweaker than expected and which has heightened fears of a recession in the USA.
It all started with a sell-off on Monday, then recovered in the following sessions, with other macroeconomic data coming from the US (lower claims for unemployment benefits) that have tempered concerns about the American economic cycle. Attention among insiders at this point has been even more focused on the next moves of central banks, in particular the Fed and of the ECB which are now seen as definitely lowering interest rates, at the September meetings.
The central banks
The Chairman of the Fed, Bank of Kansas CityJeffrey Schmid, said he was not ready to support an interest rate cut with inflation still above the central bank’s target. According to the Cme Group’s FedWatch Tooltraders have scaled back their expectations for the size of the rate cut the U.S. central bank will make in September: just 54.5% of them believe the central bank will cut by 50 basis points in September, down from more than 75% on Tuesday.
In Japan, the Bank of Japan said it would not plan to tighten monetary policy further during periods of high market volatility.
The macroeconomic scenario
Eurozone tertiary sector slows in July, according to indices S&P Global Purchasing Managers. In the US, the previous data published on the labor market has fueled worries of a recession in the United States, fears, then, tempered by the lower claims for unemployment benefits, in the last week. Operators are already looking to the key macroeconomic indicators of the next week, on inflation of the US consumer and producer price and American retail sales in the days of August.
Chinese inflation above estimates: +0.5% year-on-year, with food prices remaining stable.
Spread, currencies and commodities
The yen strengthened this week as the central bank increased interest rates. Japan (with a rush to close carry trade positions). Then, the Japanese currency fell under pressure again after three days of gains against the dollar, recording its first weekly decline since early July.
The two currencies, the euro and the franc, which in recent sessions had offered refuge to operators, were then protagonists of sales. The exchange rate between the euro and the dollar remains pegged at 1.09.
Oil prices rise with Brent in October at 79.5 dollars a barrel (+0.5%), WTI in September at 76.8 dollars (+0.8%).
In gold slightly up at 2,432.3 dollars per ounce. The spread closes the last session of the week at the levels of the day before, remaining at +144 basis points, with the yield on the ten-year BTP positioned at 3.64%.
Weekly stock market performance
The weekly performance of the main European stock exchanges is colored in red. The Japanese Nikkei index is the biggest loser, losing more than 5 percentage points. In Europe, the Italian index is the tail light FTSE MIB loses 3.2%, followed by Frankfurt and Madrid which bring home a decline of around 2%. Down by more than 1%, London and Paris. The American indices are also on their way to closing the week in negative territory, with the Nasdaq 100, the S&P 500 and the Dow Jones Industrial which give up more than 2 percentage points.
The best and worst at Piazza Affari
Among the worst stocks of the week is Technoprobe -14.8% which announced a half-year profit decrease. Equita lowered the target price on the company active in the design and production of Probe Cards used for semiconductor testing to 7.2 euros per share (from the previous 7.5 euros), confirming the “Hold” recommendation on the stock. ST and Saipem lost 9%. The palm of increases goes to MPS which gains over 7 percentage points, the protagonist of the Siena-based institute this week which presented a new plan with ambitious targets and higher than expected. Equita analysts increased the target price on Banca Monte dei Paschi di Siena to 5.9 euros per share (+6%), confirming the “Hold” recommendation on the stock. The experts appreciated the strong focus on strengthening the business model, the diversification towards the commission component, the effort to contain operating costs and minimize the CoR.
