(BFM Bourse) – In the wake of a rise again even stronger than expected in the price level in the United States, a current of risk aversion sweeps the Paris Stock Exchange and its European counterparts on Monday morning. The more inflation increases, the more central banks will have to restrict credit, at the risk of further weighing down the economy already threatened by geopolitical crises.
The fall reached -2% on Monday morning for the main European markets, a symptom of the panic of investors who realize the herculean scale of the task that central banks are only just beginning to tackle after years of practicing generous policy. Support. On Friday, the consumer price index in the United States revealed a further acceleration in May to +8.6% inflation over one year, once again taking the consensus of forecasts by surprise, which leads investors to further reassess their long-term expectations upwards. Around 11:30 a.m., the CAC 40 thus stumbled by 2.23% to 6,049.21 points, after having signed its worst week since the invasion of Ukraine, when the Dax and the FTSE MIB lost 2.1% and the Ibex 1.8%.
Concretely, this pushes bond yields to levels not seen for years – 2018 when it comes to the 10-year US Treasury note at 3.25%, the German Bund of the same maturity was not left behind at 1.569% this which marks a peak since 2014. A surge that mechanically degrades the relative interest of an equity investment.
However, central banks are just beginning to tighten their policy: the United States Federal Reserve tightened its rates in March and then in May to bring them to 1%, which still means considerable potential before reaching a level truly restrictive (the real rate is still largely negative because it is well below inflation). As for the European Central Bank, it was only last week that it officially announced its first rate hike (for next month). Conclusion: the markets are far from over.
UK GDP shrinks
To make matters worse, China where the vaccination rate remains low is still struggling with the Covid epidemic, with the threat of a new outbreak in Beijing, just days after a cautious reopening of public places. “Efforts to prevent and control this epidemic linked to bars in Beijing are more difficult than the epidemic wave that occurred in Xinfadi market in June 2020,” the spokesperson for the municipal government of Beijing (Beijing) said on Sunday. , Xu Hejian. This epidemic from June to August 2020 linked to the Xinfadi wholesale market had been one of the largest outbreaks that the Chinese capital had experienced. “Beijing will continue with dynamic and precise measures to adapt to the epidemic instead of closing all public places as it did in most districts during the previous “static management”, however assured a specialist. infectious respiratory diseases, cited by China.org.
In Europe outside the EU, it was British GDP that disappointed this morning, posting a contraction of 0.3% in April instead of an expected slight increase, while the Bank of England will in turn hold its meeting this week.
The risk of seeing the presidential party deprived of an absolute majority in the National Assembly in France adds to the pressure, penalizing the automobile or the bank, while the rise in bond yields weighs down technology stocks.
Biotech Valneva sinks to its lowest in more than a year and a half as the giant European Union order looks set to go down for good.
On the eve of the presentation of its new strategic plan, where the group should announce the spin-off of its IT services division, reveals BFM Business, Atos plunges 10%.
Among the rare increases, Thales (+2%) is benefiting from the prospect of receiving compensation of 555 million euros after the Australian government broke the agreement for the delivery of 12 submarines, Carrefour and Orange grabbing a few points given the defensive nature of their activity. Outside the flagship index, Pizzorno Environnement won 1.2% after winning the waste collection contract for 61 municipalities in the Lille metropolitan area for the next seven years.
On the currency side, the dollar benefits from its status as the world’s reserve currency and the euro falters 0.36% to 1.0479 dollars, the lowest in more than a month.
Energy prices fell 1.53% to 120.14 dollars for a barrel of Brent and 1.63% to 118.70 dollars for WTI, for fear that a deterioration in the economy would limit demand. In addition, as China struggled to fill its stocks last month in the run-up to a wider reopening in June, this scenario is taking a turn for the worse in view of the latest news from the health front.
Guillaume Bayre – ©2022 BFM Bourse