Share Dilution

2021 remains a good vintage

Friday
December 17th
Weekly market update
The week ended on a bearish note, although the Fed’s move seemed welcome on Wednesday. Financial markets are finally losing ground in the wake of technological stocks, more sensitive to the economy and the cost of money.

Despite the approach of the end of year holidays, volatility could persist due to the pandemic, after an exceptional year 2020.

Index

Over the past week, in Asia, the Nikkei gained 0.4% while the Shanghai Composite lost 0.9% and the Hang Seng 3.2%.

In Europe, red is also dominant. The CAC40, which has achieved the best annual performance so far, has lost 0.93% over the last five days. The Dax is down 0.59% and the Footsie 0.3%. For the peripheral countries of the euro zone, Portugal lost 1.4% over the week, Spain 0.8% and Italy 1.2%.

At the time of this writing, the Nasdaq100 was the worst performing in the United States (-3.3%). The S & P500 is down 1.50% and the Dow Jones is down 1.27%.

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Merchandise

Investors, who expected the Federal Reserve’s more austere tone to be accompanied by a rebound in the dollar and lower commodities, found themselves with a sore spot this week. On the contrary, the market relaxed after the Fed clarified its monetary policy, allowing oil prices to stabilize after an episode of volatility.

OPEC has reiterated that it is ready to act if the situation requires intervention, even as the cartel describes the impact of the Omicron variant as short-lived and fleeting on global oil demand. Brent crude is trading around $ 73.5 per barrel while WTI is trading above $ 71.

It was an almost perfect weekend for gold, which is back above the $ 1,800 an ounce line. Gold is benefiting from the decline of the greenback but also from an increase in volatility on the equity markets, where there are brief spells of euphoria and confusion. Silver is also recovering and trading above $ 22.

Base metals ended the week in mixed order. Zinc and lead edged up to $ 3,395 and $ 2,355, while nickel and tin posted negative weekly performance at $ 19,580 and $ 38,700 per tonne.

Equity markets

– Elmos Semiconductor (+ 33%): the title jumped this week after the announcement of the sale of a manufacturing plant in Dortmund to Silex Microsystems for 85 million euros. Analysts have been very positive about the news.

– Vifor Pharma (+ 30%): the Australian biotechnology group will make a friendly takeover offer from its Swiss counterpart for CHF 10.9 billion. The proposal, denominated in dollars, corresponds to approximately CHF 167 per share. The group’s main shareholder based in St. Gallen, with a 23.2% stake, supports the project.

– Oracle (+ 16%): the share price jumped Monday after very convincing quarterly results and the strengthening of its share buyback program. On Thursday evening, a rumor began to circulate of an interest in healthcare publisher Cerner, which could be valued at $ 30 billion.

– Rentokil (-17%): the market cautiously welcomes the acquisition of the American company Terminix for 6.7 billion dollars. The transaction will be paid for $ 1.3 billion in cash and the balance in new Rentokil shares, causing a large dilution. Terminix specializes in pest control.

– KE Holdings (-20%): the Chinese company listed in New York suffered severe write-offs after being mocked by the infamous bear fund Muddy Waters, who accused it of fraud. The company has denied this. Muddy Waters believes that KE is artificially inflating his business.

– Electricité de France (-20%): cold shower for shareholders, after a warning issued by the French nuclear giant. EDF discovered faults in one nuclear power plant and shut down another plant using the same type of reactors, which led it to reduce its financial targets for 2021.

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Macroeconomics

The main Western central banks had scheduled a monetary policy meeting in the week of December 13 to 20, in order to spend the end-of-year holidays in peace. But do not think that the exercise was going to be easy, since they had to deal with a very complex equation made up of inflation, floor rates, coronavirus, overheating labor markets, global growth etc.

Jerome Powell explained that the US economy is strong enough to do without the asset purchase plan put in place to support the economy, which will end in March. At the same time, the Fed presented a specific schedule for rate hikes. There will be three in 2022, then three more in 2023 and finally two in 2024. The central bank is stepping up the pace to curb inflation. Last September, he was still thinking of only one rate hike next year. The initial market reaction was positive, but the following day nervousness took hold, especially on the Nasdaq, where high-valued stocks are not happy about the prospect of less liquidity.

At the same time, the Bank of England surprised the market by raising its key rates, while the Omicron variant overwhelms the UK. The ECB, for its part, was content to maintain the status quo, even though it announced the gradual end of its asset purchase program intended to counter the pandemic. However, in order not to disrupt the markets too much, the pre-existing buyback program will be strengthened. These decisions did not result in major rate movements. The ten-year US debt is trading around 1.4% and the Bund at -0.38%. The French OAT remains in slightly negative territory (-0.03%).

In the foreign exchange market, the Turkish lira continues to depreciate against other currencies, notably the euro and the dollar. Turkey’s central bank cut rates again under pressure from President Erdogan, against soaring inflation. The euro appreciated to 1.13143 USD despite the firmness of the US central bank. EUR / CHF trades at CHF 1.04135, while JPY 113,362 is needed for 1 USD. The Bank of Japan also held a monetary policy meeting this week, without changing rates but reducing its plan to support the economy.

On the cryptocurrency market, the holiday season promises to be less joyful than expected with a breakthrough in the red which is definitely struggling to be absorbed. A fall of more than 30% compared to the highest has called into question market players as to the bullish pursuit, however well established since the beginning of the year. Bitcoin isn’t catching its breath either, coming dangerously close to $ 45,000 at the time of writing.

Over the past week, November’s manufacturing and services PMIs have lagged expectations, no doubt affected by the resurgence of the pandemic. In the coming days, the agenda will be much less busy as Christmas approaches. However, investors will be keeping an eye on the final US GDP reading for Wednesday’s third quarter and especially Thursday’s PCE inflation and November’s US durable goods orders.

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2021 remains a good vintage

This day of the four witches marks the end of the 2021 stock market year. If you are currently hesitating between seeing the glass half full or half empty, let’s keep in mind that this year will remain a very good year for investors. With the exception of certain Asian indices, world stock markets posted strong gains, with flattering scores for the S & P500 (+ 24.30%), the EuroStoxx50 (+ 18.2%) and the CAC40 (+26.2 %).

And if you’ve been dreaming of a Christmas gathering under the tree, then let’s not lose sight of the fact that equity indices have given us records this year, companies are making record margins and sales, and central bankers are bowing. four to pave the way for financiers on their political path. Finally, we may have had our Christmas early, which allows us to put the latest market volatility into perspective. Your weekly update will take a break for the holiday season and resume on Friday, January 7. Merry Christmas and a Happy New Year everyone!

MarketScreener.com 2021


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