Political uncertainty in France and fears over the Fed have led to the fall of the Cac 40 again, market news

Fall Bedroom 40 continues, again and again … The Paris index, which fell 4.6% last week, the worst since the beginning of March and the Russian invasion of Ukraine, fell again at 2.67%, and ended at 6022.32 points, the lowest level since March 8. This is the fifth session in a row. First of all, Cac 40 is going to move to the “bear market” or “bear market”, as it has fallen by 18.45% since the last peak on January 5.

Political uncertainty

After the first round of parliamentary elections, Emmanuel Macron’s seat looks very fragile. Presidential Coalition Together! only a few parts ahead of Nupes, the New People’s Ecological and Social Union, an alliance formed between La France insoumise, the Socialist Party, Europe Écologie-Les Verts and the Communist Party of France. According to the Ministry of Internal Affairs, the latter received 25.66% of the votes cast, compared to 25.75% according to “Together! With the current state of predictions, it is unlikely that the outcome of the second round will allow Jean-Luc Melanchon to become prime minister as part of the cohabitation, but, nevertheless, Nupes will be a significant opposition that will influence the decision.

The prospect of the absence of an absolute majority in the National Assembly in support of Emmanuel Macron’s policies adds traditional sources of concern, such as the war in Ukraine, inflation and monetary policy. In the eurozone, the European Central Bank (ECB) last week paved the way for a monetary shift by announcing the end of an asset purchase program in late June before raising interest rates for the first time in eleven years in July. . Thus, he joins the US Federal Reserve (Fed), which in March decided to increase the value of money. The movement will continue, while inflation continues to gallop across the Atlantic.

In May, the consumer price index rose by 1% on a monthly basis and by 8.6% on an annualized basis, rising to its highest level since December 1981. The cost of housing, petrol and food is a major factor in inflation. As for the “hard core” of the index, which excludes unstable data such as food and energy, the greatest growth is observed in housing, plane tickets, cars (new and old). Opportunities), health. Faced with this situation, the Fed will become more and more “hawkish”, ie more restrictive in its policy of raising rates and reducing the balance.

The Monetary Policy Committee meets for two days, Tuesday and Wednesday, to make a decision on Wednesday at 20:00 (Paris time). According to reports already released by the Fed, the market expects a new strengthening of monetary policy by 50 basis points, as well as an increase at the July meeting. But some, more gloomy, cause the rate to rise by 75 basis points Fed funds from this week. On Wall Street, major indexes continue to decline. Around 5:30 p.m. Dow Jones loses 2.35%. Nasdaq Composite 3.81% and S & P500 2.9%. The latter entered the “bear market”, as it fell by more than 20% compared to the last high in January (-21.4%).

Inversion of the yield curve

The problem with risky assets is [la Fed] we face a dilemma and we face two bad choices, sums up Max Keithner, HSBC strategist, quoted by Bloomberg. Or inflation is constantly rising and central banks will be forced to do more, which will negatively affect estimates and end up bad for risky assets. Or growth is slowing more than expected and earnings forecasts will have to be lowered. From Friday, the path to soft landing became even narrower “.

Tensions in the bond market are also palpable. The yield on the 2-year US bond, which is most sensitive to rising interest rates, is 3.22%. It even peaked at 3.2579%, short of 10-year bond yields. This inversion of the curve, which is an anomaly because it tends to be more expensive to borrow over the long term, shows that investors find it more risky to lend to the government in the short term than in the long run. And consider the recession scenario high. Even if this movement is not to be exaggerated, it shows that the stock market is both nervous and worried.

In Europe, rates have had the same upward trend: German 2-year bond yields have crossed the 1% mark for the first time in more than 10 years. The 10-year Bund is trading at 1.62%, while the Italian BTP is up 4%. This weighed heavily on bank stocks. BNP Paribas, Agricultural credit and Societe Generale lost from 3.97% to 4.69%.

With higher profitability and asylum-seeking markets, the US dollar soared, with the euro winning along with other sentiment indicators: the Australian dollar, the New Zealand dollar and the Korean won. notes Jeffrey Halley, senior market analyst for the Asia-Pacific region in Oanda.

Cyclical and technological stocks that are sensitive to the economic environment have lost ground. Unibail-Rodamco-Westfield fell by 8.13%, Renault 7.4% and STMicroelectronics 5.72%.

Valneva in poor condition?

In addition to Cac 40, many falls should be reported. Valneva fell by 25.26%. In a press release issued Friday night, Nantes Biotech raised concerns about the volume of its Covid-19 vaccine that the European Union will consider ordering if approved. Insufficient, as they are now, will not allow to continue the VLA2001 program, which will lead to the termination of the agreement with Brussels.

Also abused, Athos fell by 10.98% on the eve of the presentation of its new medium-term roadmap. According to BFM Business, citing a source familiar with the matter, the IT services group may separate its declining outsourcing services business (a division of the Tech Foundation) into a separate legal entity. However, the board of directors would oppose the project. Disagreements that helped clean up the stock market.

finally, Elior fell by 18.31%. HSBC lowered its opinion on the catering group from “buy” to “save” and lowered the target price from 7.50 to 3 euros. The broker claims that he perceives ” a large number of performance risks as the company looking for a new CEO says the pace of recovery is slow.


PC