The beginning of May was difficult for the stock market, driven by a surge in inflation and the prospect of a strong gesture by the US Federal Reserve on Wednesday on its decision on monetary policy. At the end of the Cac 40 lost 1.6%, falling below the threshold of 6,500 points, to 6,425.61 points with a trading volume of 3.5 billion euros.
Once again, the flagship index was very frightened in the middle of the morning, when it suddenly fell by 3.44% to a low of 6308.47 points, falling victim to other stock markets. Europeans, “rescue disaster”. Probable transfer error, exacerbated by the fact that markets became slightly less liquid due to the closure of the London Stock Exchange over the weekend of May. The Stockholm market has been one of the worst hit since its benchmark OBX fell 8% before recovering. The European Stoxx 600 fell more than 2% to its lowest level in a day.
” This could be due to a transaction error or a technical malfunction. It did not seem to be caused by an external event, because the information would eventually appear. “,” Said Martin Munch, vice president of stock sales at Jyske Bank.
Poor activity rates
However, the day began with a minus, after the announcement of disappointing figures in China and then in Europe. Initially, China’s official PMI production fell 2.1 points to 47.4 last month, for the second month in a row below the critical threshold of 50 points, separating growth and decline. Caixin’s industrial PMI also fell 46 points after 48.1 in March. Health restrictions blocking several cities and many companies in the country do not bode well for rapid improvement.
On the Old Continent, the PMI index, published by S&P Global, was 55.5 points in nineteen in April, the lowest level in 15 months, while sales prices recorded record growth. ” Eurozone production activity almost stagnated in April, as production recorded the weakest growth since June 2020 says Chris Williamson, chief economist at S&P Global, The companies surveyed not only reported worsening supply tensions exacerbated by the war in Ukraine and new health care restrictions imposed in China, but also highlighted the impact of rising prices and growing uncertainty on economic prospects on demand.. »
The same concern over the Atlantic, where the production index published by the Institute of Supply Management (ISM), which was monitored more than the PMI, fell 1.7 points in April to 55.4, the lowest level since August 2020. undoubtedly fell, but this figure remains high, above 80.
For Richard Fisher, former Fed President Dallas, The only way to curb out-of-control inflation is through very restrictive monetary policies. “, Reminds CNBC on Monday. In the past, strong monetary policy has certainly put an end to inflation, but it has also encouraged companies to outsource labor costs. As a result, American workers have seen their incomes stagnate in productivity for four decades. A period known as stagflation, with a double threat of stagnant growth and sustained inflation.
This is what the members of the central bank will have in mind during this two-day meeting, which should lead to their conclusions, which are expected at 20:00 Paris time. The result is an increase in key rates by 50 basis points, according to the current consensus. A press conference by its President Jerome Powell will be held at 20:30. In March, prices soared by 8.5% to a record high amid rapid demand, partially fueled by state aid, following the pandemic, and supply chains continue to suffer.
“When we start this month in May, the market may notice a rebound due to short-term oversold, but there are still several reasons for concern.warns JC O’Hara, at MKM Partners. We believe that the long-term technical indicators of the shares are not oversold enough to guarantee a strong buy signal. We also believe that managers have begun to re-evaluate the stock market on the basis of factors such as “recession”. If so, we are still overrated. In New York, the trend remains unclear on Monday, despite a sharp drop on Friday. The yield of the Dow Jones is 0.28%, while the Nasdaq Composite receives 0.15%.
Cyclical or industrial stocks were among the hardest hit by the day’s trend, particularly decliningArcelorMittal (-4%), Schneider-Electric (-3.5%), saffron (also -3.5%) and Stellantis (-3%). Most of the few technologies in the index also lost more than 2%.
Rare rise of the day, Crossing increased by 1.1%. Canadian Alimentation Couche-Tard and the British EG Group are discussing the merger to create a world leader among shops and gas stations, according to Dow Jones, citing sources familiar with the matter. In early 2021, a Canadian group tried to buy Carrefour, an operation that Bercy refused.