The Paris Stock Exchange is showing its fifth fall in a row, the longest since late February, and Wall Street is ready to follow. The acceleration of inflationary pressures indicates an even more aggressive reaction of central banks to tighten monetary policy, which increases the fear of recession.
Around 2:30 p.m. Bedroom 40 fell again by 1.98% to 6,064.89 points after a low of 6,033.06, unprecedented since March 8 (5,903.10). The volume of business according to the index is 1.6 billion euros.
Contracts future In June, US indices fell by 2-3.2% after recording the steepest weekly decline since late January last week. The S&P 500 is on the verge of a bear market after falling by almost 20% from its January high. Among technology stocks, Alphabet, Apple, Amazon and Microsoft lost 2% to 4% in the New York market.
The Fed is facing a dilemma
In May, consumer prices in the United States rose by 8.6% year on year, the highest level since December 1981. Statistics have shattered hopes for a future peak in inflation and increased pressure on the Federal Reserve two days after its monetary policy decision. Until last Friday, economists usually expected an announcement of a Fed rate increase of 50 basis points on Wednesday, but some, including Jefferies strategists, now expect an increase of 75 basis points.
” The problem with risky assets is [la Fed] we face a dilemma, and we face two bad choices, sums up Max Keitner, HSBC strategist, quoted by Bloomberg. For him, or inflation rises over time and central banks will be forced to do more, which will hurt valuation and end up bad for risky assets. Or, if growth slows more than expected, earnings forecasts will have to be lowered. From Friday, the path to soft landing became even narrower “.
In the bond market, the yield on the 2-year US bond, which reflects interest rate expectations, reached 3.2537%, thus briefly rising to a 10-year maturity for the first time since April. This inversion of the curve is generally considered a harbinger of recession.
In Europe, the yield on German 2-year bonds this morning for the first time in more than 10 years exceeded the mark of 1%. The 10-year Bund is trading at 1.5960%, while the Italian BTP is up 3.9180%. This is a burden for European banks, while the ECB last Thursday did not give any instructions on the instruments it intends to use to support the bonds of the so-called peripheral countries in the face of the risk of increasing yield spreads. BNP Paribas, Agricultural credit and Societe Generale lose almost 4%.
Last Thursday, the European Central Bank said it was preparing to raise the key rate by a quarter of a point in July. The next increase is expected in September, and its magnitude will depend on new medium-term inflation forecasts. Should they be revised upwards, the ECB would have to decide to increase it by 50 basis points.
Uncertainty surrounding Valnova’s vaccine candidate
Political risk is also on people’s minds. In France, the results of the first round of parliamentary elections show a fragile majority for the coalition formed around President Emmanuel Macron against the New Alliance Populaire Ecologiste et Sociale (Nupes), led by Jean-Luc Melanchon. Together! According to the Opinion Way, 260 to 300 seats will be collected, and Nupes – from 170 to 210. The absolute majority – 289 deputies out of 377 elected.
Valneva falls by 21%. On Friday night, Biotechnics said preliminary figures from the European Commission would be insufficient to sustain the Covid-19 vaccination program.
Cyclical and technological actions imitate them, sensitive to the economic environment. Renault a decrease of 4.8%, Fauretia 6.4% Unibail-Rodamco-Westfield by 4.8% and STMicroelectronics by 4.7%.
in luxury LVMH, Caring and Hermes fell between 2.6% and 3.3% as the cities of Shanghai and Beijing resumed mass testing in the face of the recovery of the wave of Covid-19 infection, which revived fears about new housing conditions shortly after health restrictions began to ease.
Athos 10% drop. Great mistrust on the eve of the announcement of its new strategic plan.
against the trend Thales a 1.5% increase following the Australian government’s decision to pay € 555 million to its subsidiary Naval Group as compensation for breach of contract to supply 12 submarines. In addition, Goldman Sachs has resumed coverage of shares with a recommendation to “buy” up to 146 euros.
Elior inferior to 13.7%. HSBC downgraded the catering group from “buy” to “keep” 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.