Autumn and its share of rain….rain of business results, rain of bombs of all kinds, but also torrential rain.
Let’s return for a moment to the conflicts that punctuate daily news. We know that investors, like all human beings, hate the unexpected and hate conflict. On the other hand there is the famous saying “Buy by the sound of the cannon and sell by the sound of the bugle”. So if we see for example what the American SP500 index is doing, it would seem that the clarion call has not yet sounded.
Ukraine would have allowed buying on weakness just like that of the Middle East. Since then, investors do not seem worried or at least not worried about the conflicts. From a historical perspective it would seem that there is nothing new in the tropics.
The markets are therefore more sensitive to the policies of central bankers, Chinese economic figures and company results.
The central bankers are accommodating like the ECB which, as expected, has lowered its rates and seems to want to continue to want to help a European economy which is showing worrying signals like Germany whose government has just revised its lowered its growth forecasts, expecting a decline of 0.2% in GDP this year after a contraction of 0.3% in 2023. Goldman Sachs reduced its forecast for annual profit growth in 2024 for the European STOXX index 600 to 2% from 6% on Friday, citing risks from rising corporate taxes and potential tariffs. According to Goldman Sachs strategists, an escalation in tariffs would shave up to 9 percentage points off the European benchmark’s profit growth in 2026. In addition, higher corporate taxes in Europe, particularly France and Italy, represents a slight drag on earnings, while China’s latest stimulus measures are unlikely to have a significant near-term impact on luxury spending, strategists said . Goldman forecasts that annual earnings of STOXX 600 components will increase by 3% in 2025 and 4% in 2026-2027.
In China, gross domestic product (GDP) growth reached 4.6 percent year-on-year in the third quarter, according to data released Friday by the National Bureau of Statistics (NBS). If this performance is a little higher than expected, it indicates a slowdown in activity after the 4.7% growth recorded in the second quarter, economists point out. Main pitfall to the current recovery: the persistent crisis in real estate. In a context of job insecurity in China, low household consumption also risks tipping the Asian giant back into deflation. The consumer price index (CPI), the main gauge of inflation, increased by 0.4% in September year-on-year, less than expected and a sign of persistent weakness in demand.
Last but not least, the publication of results will be legion this week. Among them, SAP, L’Oréal, Roche, Hermès, Unilever and Sanofi in Europe. GE Aerospace, Tesla, Coca-Cola, T-Mobile US or IBM in the United States.
What about the markets on Friday?
Thank you China… in Paris, Kering gained 3.50%, LVMH 2.26% and Hermès 1.06%. Elsewhere in Europe, Salvatore Ferragamo gained 2.15% in Milan and Hugo Boss 3.09% in Frankfurt. Also supported by Chinese measures, the basic resources compartment gained 1.5% on Friday. Antofagasta and Anglo American ended up 1.4% and 1.8% in London. Switzerland follows suit and the SMI ends with a gain of 0.18%. Note that Goldman Sachs lowered its recommendation for Richemont to “neutral” from “buy” as well as its price target. In the United States, the Dow Jones (+0.09%) and the S&P 500 (+0.40%) recorded a new closing record, while the Nasdaq index gained 0.63%. If the general tone was positive, it was especially the technology sector which showed strength, thanks to Netflix, but also Apple (+1.23%). Sales of iPhone 16 in China were 20% higher than those of its previous model during the first three weeks of marketing.
Another consequence of the “risk off”, the yields on Treasuries therefore also lower the dollar. The ‘$-Index’ fell by 0.3% on Friday, towards 103.50. The Euro rose precisely +0.3% to 1.0862 (compared to a floor of 1.0825 the day before), the Yen gained 0.45% to 149.5, the Pound +0.25% to 1.3040 A note the weakness of the Swiss Franc which also lost 0.3% against the Euro. On the other hand, gold futures were trending upwards.
The raw materials did not shine like the yellow metal. Grain prices fell Friday after traders resumed a technical selling pattern that was partly boosted by harvest pressure for corn and soybeans, as well as ample domestic and global supplies. . Corn prices ended Friday’s session down nearly 0.75%, and soybean prices down nearly 2%. Wheat suffered varying losses, with some contracts losing as much as 2.8% today. The base metals, for their part, reacted very little. Oil prices fell as investors believed in the prospect of a ceasefire in Gaza, while putting into perspective a response from Israel on Iranian energy infrastructure. The price of a barrel of Brent from the North Sea, for delivery in December, lost 1.87%, to $73.06. A barrel of American West Texas Intermediate (WTI) due in November fell 2.05% to $69.22.
Finally, bitcoin rose to its highest level in two and a half months, boosted by the prospect of the election of Donald Trump, self-proclaimed champion of cryptocurrencies.
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