Dow -0.15%, S&P 500 -0.04%, Nasdaq +0.12%, Russell -1.61%, SOX -0.07%, Eurostoxx -1.95%, SMI -0.42%.
The past stock market week is strangely reminiscent of the current weather, strange, surprising and even annoying.
In the United States everything is fine, at least in appearance. The Nasdaq100 index (NDX) reached a new historic record at the bell on Friday, it rose by more than 3% over the week, everything seems to be going well in the best of all possible worlds, except that if we focus for a moment on the reasons for this increase, we see that it is still the tech behemoths that show the way, themselves driven upwards by Nvidia, Apple and Microsoft, which progressed between 4 and 9% over the week. Amazon, Alphabet and Meta are in decline but are also progressing considerably this year, leaving only crumbs for the rest of the stock. The rest of the coast precisely, which is having a hard time even trying to keep up. Take the Dow Jones and the Russell2000 (RTY), which have both fallen over the past 5 sessions, dropping 0.54% respectively 1%. The S&P500 (SPX) manages to gain a weekly performance of 1.58% but this cannot eclipse the decline of 0.57% in the SPW, its alter ego with equally weighted market capitalizations. Let us remember here that the Fed has just confirmed to us eye to eye that the first rate cut will take place again this year. The market may have reached its tipping point, that famous moment when it begins to worry about growth rather than inflation. Friday’s macro shows that the consumer climate is deteriorating in the United States (University of Michigan index), we will also note that the SPW has broken its short-term upward channel downwards, that the index of Transport (TRANm considered as a leading indicator) lost more than 1% last week and its technical configuration deteriorated, volatility began to rebound, the VIX gained 6% to 12.66 and its bond alter ego, MOVE , does the same by gaining 9% to 100.16.
The dollar remains in demand, the Dollar Index (DXY) trades at 105.55, the EUR/USD pair is fighting this morning with the level of 1.0700. There is a bit of strength in the greenback in the air, but also weakness in the euro, I will come back to that. Gold is making some ground, the ounce is trading at 2,319 dollars, oil is trading at 78.09 dollars per barrel of WTI Light Crude. On the bond market side, the US 10-year yield is trading at 4.23% this morning, its next support is at 4.19%, its resistance at 4.35%.
In Europe, the past week is not really going the same as on the other side of the Atlantic, the fault of the European elections which are creating a big mess in people’s minds. It is France which is polarizing general attention after the rout of the presidential party in the European elections and Emmanuel Macron’s surprise decision to dissolve the National Assembly. The market fears the arrival of the National Rally with all that this implies at the budgetary level, Marie Le Pen’s party wishing to revive growth through demand, which would involve widening the country’s already yawning deficit. The program announced by the New Popular Front does nothing to reassure and bond market participants massively sell French debt against the German Bund all week long, the yield spread widening this morning to 80 basis points, it’s huge. This has the effect of putting pressure on the euro, Italian and Spanish debts resist for part of the week but are dragged down in the second part, while the stock market also suffers, the CAC40 loses more than 6% over the week and wipes out all its gains for the year, penalized especially by its banking sector. Note also that the 5-year CDS (Credit Default Swap) of France, this insurance against a payment default that can be purchased in the market, jumped to the level of the American CDS, this shows that investors are worried that the France is heading toward the same type of political gridlock that has hampered U.S. efforts to limit spending and deficits.
The first round of legislative elections in France takes place on June 30, so no one can have a precise idea of what the new face of the National Assembly will be on the morning of July 8. An absolute majority of the RN is anything but certain, the market is only applying a risk premium to France just in case as it stands.
In an appeal to moderates, Marine Le Pen declared to Le Figaro that she would work with Emmanuel Macron if her party won the early elections. Tens of thousands of protesters are taking to the streets to oppose his far-right policies. Ms. Le Pen indicates that her protégé Jordan Bardella, 28, would become prime minister if his party managed to form a majority.
Neel Kashkari (who still doesn’t vote at the FOMC but has plenty to say) tells CBS that the Fed is in a good position to take its time before starting to cut rates.
Boris Vujcic says inflation must improve for the ECB to cut rates in September. Any indication of a delay in meeting the central bank’s target would reduce the chances of a reduction.
Growth in China’s industrial production slowed in May and the collapse in property prices deepened, while retail spending beat expectations.
On today’s macroeconomic menu, labor costs in the euro zone (11:00 a.m.) and the Empire Manufacturing index in the United States (2:30 p.m.) will make the news.
The French army places an order for ammunition with Thales. Furthermore, Thales and the CEA sign a partnership on generative AI. Alstom wins a 430 million euro contract in the United Kingdom. Adidas is investigating allegations of widespread corruption in China. Nestlé stops part of its Perrier production for maintenance. Google loses its attempt to end the antitrust proceedings initiated in the United States over digital advertising. Apple and Meta are expected to be charged by the EU under rules on technology platforms. Activist Starboard Value is taking a roughly $500 million stake in Autodesk, according to the WSJ.
This night and this morning in Asia, the indices are trading down, except for Hong Kong which is up 0.07%. Tokyo lost 1.7% at the bell, Shanghai fell 0.58%, Seoul returned 0.52% and the Nifty50 was closed. The future SPX trades around balance, Europe rebounds by 0.7% at the opening, just like the CAC40.
