ECB will make money more expensive, the stock market fears that the summer will be “very hot”, market news

It is now clear that the European Central Bank, in turn, will raise its key interest rate this summer to meet inflation, which is expected to still be over 2% in 2024. This will be the first such move to the eurozone in more than ten years. At the end of its meeting on monetary policy, the Governing Council of the ECB confirmed the cessation of asset purchases from next month, the month in which the Frankfurt institution planned to announce an increase of 25 basis points after meeting 21. Refi, which will increase from 0% to 0.25%. She also hinted that if the inflation situation does not improve by September, she will accelerate the rate increase, announcing an increase of 50 basis points.

Frederic Ducrose, head of macroeconomic research at Pictet Wealth Management, said on Twitter that the key finding is that “The ECB has lifted the burden of proof. The inflation forecast is expected to improve if the ECB does not raise its rate by 50 basis points in September. » Secondly, according to Deutsche Bank strategist Jim Reid, “The ECB is expected to return to successive increases of 25 basis points until it reaches a final deposit rate of 2% in mid-summer 2023, although there is a risk of a further increase of 50 basis points before key rates become neutral. »

The prospect of the ECB’s forced exit from the zero-interest rate policy, raising the rate from 0% to 0.75% in just three months, is not to the liking of the stock market. The era of negative deposit rates has also ended. in Bedroom 40 lost 1.4% to 6,358.46 points. In the secondary debt market, the ten-year sovereign bond rate in France exceeded the 2% threshold for the first time in eight years. “Less cash, fewer bond purchases and higher rates – the perfect cocktail for a very hot summer”comments Nicholas Forest, head of bond management at Candriam. “The end of quantitative easing poses a clear threat to financial stability. Italian distribution has already expanded significantly. Even if markets are considering a structure for spreads, no additional tools have yet been introduced. Thus, the risk of fragmentation is significant, and there is no doubt that the ECB should announce in the coming months the introduction of a new instrument in the coming months. »

War, “high price” for the economy

The ECB has revised its inflation forecast upwards. Although consumer prices in the eurozone in May reached a record 8.1% for the year, the ECB expects inflation at 6.8% this year against 5.1% in March, and then fall to 3.5% in 2023 (revised from 2, 1%) and up to 2.1% in 2024 (compared to 1.9% earlier). Regarding the GDP growth forecast, it was reduced from 3.7% to 2.8% this year, from 2.8% to 2.1% in 2023 and increased from 1.6% to 2.1% in 2024 .

While investors are trying to assess the extent and pace of future strengthening of the central bank’s monetary policy, they are also waiting for the May inflation rate in the United States, which will be released tomorrow. According to the consensus formed by Bloomberg, they were to stabilize at 8.3% within one year.

The OECD yesterday warned of the risks looming over the global economy “Pay a high price” for the war in Ukraine in the form of lower growth, higher inflation and potentially long-term damage to supply chains.

Two options for EDF nationalization are being explored

Among the biggest falls in Cac 40, ArcelorMittal fell by more than 4% Unibail-Rodamco-Westfield lost 3.5% and saffron fell by 3%.

Contrary to trend, EDF increased by more than 6% on DTH. The nationalization of electricians is one of the priority projects of the new government after the parliamentary elections, the newspaper reports. Echoes. The state, which owns 84% ​​of the group’s capital, is exploring two options: either through a simplified public offer for minority shareholders, or through a nationalization bill, the diary said.