A feverish but winning week

The stock market weather was like that in France: very hot, to the point of causing some sweating and drying up trading volumes. A welcome, albeit late, rebound on Friday enabled the Cac 40 to post a slight weekly gain. Wall Street, a little out of sync, was more in the red, but the Dow Jones, climbing sharply in the home stretch, only dropped 0.5% (Friday at 5 p.m.).

Operators have returned to more reason about the US Federal Reserve’s monetary policy. The scenario of a 100 basis point increase in key rates, which dominated on Thursday, the day after the announcement of the acceleration of inflation in June, was ruled out, as of Friday, in favor of an increase 75 basis points, the second in two months. However, this will not prevent the United States from falling into recession, according to economists. the forward spread in the short term, i.e. the gap between the 3-month interest rate and expectations for this same rate on the 18-month horizon, has not yet reversed, but it is taking the way, reinforcing the scenario of an impending recession. In any case, the results of the American banks unveiled this week, both those of JPMorgan, Morgan Stanley and Wells Fargo, already bear the marks of the rise in rates and the risks to the economy.

These reasons for caution coexist with others, the specter of an energy crisis in Europe, while the Nord Stream 1 gas pipeline is under maintenance, the euro returned to parity with the dollar and the fear of a reconfinement in China , as the epidemic resumes. In the second quarter, the zero Covid policy caused the GDP of the world’s second largest economy to plunge. It contracted by 2.6% compared to the previous quarter. The stock market did not take umbrage, preferring to see the glass half full, namely the Chinese rebound in retail sales and industrial production in June. It remains to be seen how long this dynamic will last.