Disappointing indicators in the US, but not in China – Borderer Monday Report

In the eurozone, household confidence is falling, as are manufacturing and services PMIs.

Economy

The statistics published in the United States were disappointing. Manufacturing and services PMIs fell more sharply than expected in June, from 57 to 52.4 and from 53.4 to 51.6, respectively. Likewise, the Chicago Fed’s (from 0.4 to 0.01) and Kansas City (from 23 to 12) key economic indicators are settling more than expected. Existing home sales were down 3.4% m/m in May, while new home sales were a pleasant surprise (+10.7% m/m). In the eurozone, household confidence fell from -21.2 to -23.6, as did manufacturing PMIs (from 54.6 to 52) and services (from 56.1 to 52.8). In China, 1-year (3.7%) and 5-year (4.45%) lending rates remain unchanged and contraction in industrial profits is slowing (from -8.5% to -6.5% y/y ) in May.

Climate

Given gas supply risks, Germany is preparing to restart 10 GW of coal-fired power plants. This decision will have an environmental cost: with a utilization rate of 90%, 10 GW of coal-fired thermoelectric power plants emit around 80 million tonnes of CO2 in a whole year, against around 30 million tonnes of gas equivalent.

Obligations

Recession fears intensified following the publication of the PMI indices, which were below expectations in the Eurozone and in the US. In this context, the market lowered its expectations of a rise in the main interest rates and sovereign yields fell in the US (10 years -10bp) and in Europe (Bund -24bp). In credit, the increase in risk associated with gas shortages weighed on European High Yield spreads (+42bp) while the widening was more measured in the US (+10bp).

Merchant sentiment

exchange of bag

Last week’s rally, based on hopes of slowing inflation, could be short-lived, rates showing some tension this morning. As a preview of earnings season, we will have Nike, H&M, Micron or General Mills and on the macro side we will have durable goods orders, GDP and ISM (US), and in the euro zone, consumer confidence, unemployment and CCI.

Coins

€/$ is consolidating around: €/$ 1.0570 , sup. 1.05 , a break of the €/$1.06 resistance would confirm a slightly bullish trend. Traders are unsure of the pace of the Fed’s rally, causing some profit at $: $/CHF 0.9569, sup. 0.9470, res. 0.9733. £/$1.2303, extra 1.2040, res. 1.2408. CHF remains firm at €/CHF 1.0118 , sup. 0.9972, res. 1.0340. The ounce of gold is at $1,838/oz, sup. 1’755, res. 1,910.

markets

Weak economic numbers are driving down 10-year sovereign yields (USD: ~-10bp; EUR: ~-20bp; CHF: -15bp), commodity prices (agricultural: -6.8%; copper: -6, 5%) and widen credit spreads, especially in the HY segment. Equities rallied surprisingly by 6.6% in the US, but much less elsewhere (Europe: +2.4%; emerging markets: +0.7%). This risk appetite prevents gold (-0.6%) from benefiting from falling rates and the dollar (dollar index: -0.5%). To be monitored this week: key economic indicators (Dallas and Richmond Fed), household confidence, home prices and ISM manufacturing in the US; EC confidence indices (economy, services, households) and consumer prices in the euro area; China Manufacturing and Services PMI.

swiss market

To be monitored this week: April construction price index (OFS), May retail sales (OFS), June economic barometer (KOF), volume of interventions in foreign exchange markets in the first quarter (BNS) and PMI indices for June purchasing managers. Many companies will hold their General Meeting and Titlisbahnen will publish their H1 results.

Actions

ASTRAZENECA (Core Holding): Following the recently published positive clinical data, the European Medicines Advisory Committee (CHMP) unsurprisingly recommends the approval of Enhertu as a second-line treatment in HER2+ breast cancer. The decision of the European Medicines Agency (EMA) should therefore follow in the coming days. This indication represents a sales potential of c. US$1-1.5 billion. As a reminder, Enhertu is an important long-term growth engine for the group.

TENCENT (Satellite): Prosus has announced that it will resume the sale of a small number of Tencent common shares on a regular and orderly basis to fund the repurchase of its own shares. Prosus has an approximately 28% stake in Tencent.

ZALANDO (out of the Satellites list) issued a warning about its 2022 sales and results, as well as a more cautious view of the future. In a context of store reopenings unfavorable to e-commerce, difficulties in passing on price increases, consumer arbitrage in the face of inflation and rising rates, as well as a future economic slowdown, the visibility of the group’s prospects has deteriorated sharply. .

ZURICH (Satellite EU) sold its traditional portfolio of life businesses in Germany last week. This operation, already reported by management, releases capital (8 SST solvency points) potentially redistributable to shareholders.

Leave a Comment