After procrastinating a lot, the Paris Stock Exchange managed to progress slightly on Thursday (+0.3% for the Cac 40) while Wall Street is recovering. In New York, the Dow Jones gained just over 1% and the Nasdaq Composite rebounded 2%. The latter had entered, last night, in a correction phase after a fall of more than 10% since its November record. The giants Apple, Amazon, Alphabet, Meta and Microsoft resume around 2%.
The yield on the ten-year sovereign bond stabilized at 1.83%, below the session peak seen yesterday at 1.9%, the highest in two years. That of the German Bund with the same maturity is easing very slightly the day after its first passage into positive territory since May 2019.
Prices will drop gradually this year
The trend was torn between signs of monetary easing in China and the prospect of Fed tightening, while the tone of the minutes of the latest ECB Governing Council meeting unsurprisingly shows divisions between “doves” and “hawks” within the institution. Members of the Governing Council spoke of a risk that inflation would remain above their target, while arguing that the central bank should remain open to both monetary tightening and easing.
In the USA, “there is little doubt that the Fed will act on rates in March, and, as the meeting approaches, speculation has run rampant this week on a 50 basis point hike when it takes action, recalls Michael Hewson, chief market analyst at CMC Markets. But that seems highly unlikely given that, even now, it continues to strengthen its balance sheet. Also, it would be a considerable change in tone from his recent communication about the December meeting.”, he argues.
For Ipek Ozkardeskaya, analyst at Swissquote, an increase of 50 basis points in March is priced in.
On this side of the Atlantic, Eurostat confirmed this morning the 5% increase over one year in consumer prices in December in the euro zone, an unprecedented level, after 4.9% in November. “Inflation is expected to have peaked at 5% in December, with rising energy prices set to decline sharply this year. But, we expect core inflation to stabilize around 2%, pushing the ECB to set the stage for a rate hike next year.”, says Jack Allen-Reynolds, Senior Economist Europe at Capital Economics.
For Christine Lagarde, prices should stabilize before “gradually decrease during the year”. Regarding interest rates, “We cannot act immediately. If I raise interest rates, it will have an effect within six to nine months, the time it goes down the chain of financing. But it’s holding back growth.”, she said on France Inter.
New company publications
Corporate publications continue in the United States. American Airlines (+0.2%) posted an adjusted loss of $1.42 per share, against an estimated $1.48, for a doubling of its turnover to $9.43 billion. The airline, however, expects a 20% decline in revenue for the current quarter. Component of the Dow Jones, Travelers Companies (+5.5%) exceeded expectations in terms of profit as billings in the fourth quarter and generated a profit of 5.20 dollars per share, against 3.84 anticipated. The accounts of netflix are expected after closing.
In Paris, on the Cac 40, Alstom lost 1%. The railway equipment manufacturer reported an 11% increase to 3.92 billion euros in its turnover in proforma data, in line with its forecasts for the first nine months of its 2021-2022 financial year. This figure is however lower than the consensus, which was counting on 4 billion euros. The group nevertheless confirmed its annual and medium-term outlook. It also forecasts a sequential increase in its sales in the second half of the year and aims for a gradual recovery in adjusted operating income over the 2021-2022 financial year.
Renault fell 0.25% as Nissan’s chief executive told Bloomberg the chip situation remains “uncertain”, even if production remains on the road to recovery.
Conversely, Vivendi rose 1.5%. Goldman Sachs has taken over coverage of the media company with a buy tip.
Apart from the Paris flagship index, Valneva rebounded 20%. The group announced that its inactivated vaccine candidate against Covid-19 showed neutralization of the Omicron variant of the coronavirus responsible for the disease. “The results of a preliminary laboratory study (…) demonstrate that antibodies from serum of individuals vaccinated with three doses of Valneva’s inactivated Covid-19 vaccine candidate, VLA2001, neutralized the Omicron variant.”, indicates the laboratory.
Soitec tumbled 18% on news of a surprise boss change. The group’s executive committee denounced in a letter addressed to the group’s board of directors the “precipitation” and the“opacity” of the process that led to the appointment of Pierre Barnabé as the new CEO, report The echoes and The gallery.