In the euro zone, the manufacturing PMI is down, as is that of services. In China, industrial profits are contracting.
The statistics published in the United States were rather disappointing. May’s manufacturing PMI fell more than expected (from 59.2 to 57.5), as did that of services, which fell from 55.6 to 53.5, and the Richmond Fed index, which fell by 14. at -9. Sales of new homes also declined by 16.6% m/m in April, more than expected. Household income in April progressed a little less than expected (+0.4% m/m) while their expenditure surprised positively (+0.9% m/m). In the euro zone, the manufacturing PMI fell from 55.5 to 54.4, as did that of services (from 57.7 to 56.3) in May. M3 growth slowed more than expected to 6% y/y. In China, industrial profits contracted by 8.5% y/y in April.
According to the World Bank, revenues from carbon prices amounted to 84 billion dollars in 2021, an increase of 60% compared to 2020. For the first time, revenues generated by ETS (Emissions Trading Schemes, ie emissions trading) have exceeded those of carbon taxes. Despite this progress, the institution estimates that the cost of CO emissions2 covered by these mechanisms is only sufficient in 4% of cases to achieve the Climate objectives.
Markets rebounded on stabilizing expectations of rate hikes in the US. The publication of the Fed’s minutes did not show a more “hawkish” message and the 10-year ended the week slightly lower (-4bp), with the market pricing in a terminal rate of c.3% (-12bp) today. ). On credit, US spreads tightened sharply (HY -61bp / IG -15bp) and the indices generated strong performances (HY +3.4% / IG +1.5%). The movement is less marked in Europe with mixed performances (HY +0.75% / IG -0.2%).
Sentiment des traders
European markets started the week on the rise, following Asia and after Wall Street finally stopped its slide after 7 consecutive weeks of decline. The US will be closed today (Memorial Day) and on the macro side, we will have the ISM and unemployment. For the euro zone, CPI, PPI and retail sales will be published. The rebound should continue this week.
The € is still supported by the anticipation of future rate hikes: €/$ 1.0754; however a break of the res. 1.0870 is needed for this upside to not run out of steam otherwise a move back towards 1.0530 above is likely. The $ remains under pressure at $/CHF 0.9565, sup.0.9473, res. 0.9988. The £ benefits from the correction of the $: £/$ 1.2630, sup.1.2439, res. 1.2773. The oz of gold rises to $1,861/oz, sup. 1’807, res. 1’910.
Against a background of oversold markets, US equities rebounded by more than 6% (Europe: +3%; emerging: +0.8%). Less “hawkish” than expected Fed “minutes” enabled this relaxation, also visible with the tightening of credit “spreads”. The dollar suffered (dollar index: -1.4%) allowing gold to progress (+0.5%). Oil is also up sharply (+6.1%). To be monitored this week: house prices (FHFA and S&P CoreLogic), household confidence, manufacturing and services ISM and employment report in the United States; EC confidence indices (economy, industry and households), consumer price indices, unemployment rate and retail sales in the euro area; China manufacturing and services PMI.
To be monitored this week: Q1 employment barometer (OFS), May economic barometer (KOF), April foreign trade/watch exports (Ofdf), April retail sales (OFS), Q1 GDP (Seco), indices May PMI and May inflation (OFS). The following companies will release numbers: Aryzta and Dottikon ES.
ASTRAZENECA (Core Holding) will present this weekend the detailed data of the study evaluating Enhertu as a last-line treatment in patients with breast cancer expressing low protein HER2. The magnitude of the efficacy will give an indication for success further upstream in the treatment regimen (the study in second-line treatment is planned for 2023). The HER2-low form represents c. 55% of breast cancers.
MEDTRONIC (Satellite) published a disappointing Q4. Business is experiencing supply chain disruptions and shutdowns in China, which will continue to impact Q1. A better trend is expected in H2, which will benefit from a more favorable basis for comparison. These elements are reflected in the 2023 outlook, with EPS expected at USD 5.53-5.65 (3-4% below consensus). The stock’s valuation reflects these uncertainties (PE22 = 17.8x). Hold positions.
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