Cac 40 drops more than 2% as Fed rate hike accelerates


Wednesday’s rebound fizzled on the Paris Stock Exchange, as did the relief rally that prevailed on Wall Street last night after the US Federal Reserve hiked rates in line with expectations, albeit on a scale not seen since 1994. The market took note of the 75 basis point hike in the rate of Fed-funds but fears that the fight against inflation will end up weakening the economy, and therefore the results of companies.

Mid-session, the Bedroom 40 fall of 2.23% to 5,896.30 points in a business volume of 980 million euros. The contracts future on American indices relapsed from 1.6% to 2.4%, after the 1.5% increases in the S&P500 and 2.5% of Nasdaq Composite Wednesday.

Investors fear a contagion from monetary policy tightening by central banks. The Swiss National Bank announced this morning a surprise hike of 50 basis points in its main interest rate to -0.25%, the first since 2007, and indicated that others may be needed thereafter. The Bank of England will deliver its copy at 1 p.m. and the market, which had until then expected a rise of a quarter of a percentage point to 1.25%, is now leaning on 50 basis points, even 75, in the wake of its American counterpart.

Towards a rise of 75 basis points in July?

The Fed’s gesture was widely anticipated by the markets since the announcement last Friday of an acceleration in the rise in consumer prices to 8.6% over one year, a level not seen since December 1981, especially since five-year inflation expectations recorded by the University of Michigan survey came out at their highest since June 2008.

The rate of Fed-funds is now in a range of 1.5% to 1.75% and the central bank plans further hikes this year, but its chairman Jerome Powell has indicated that deep tightening will not become the norm in the next few months. monetary policy committee meetings. He nevertheless hinted at a 50 to 75 basis point hike in July and said he was confident in the Fed’s ability to control inflation, while conceding that this ” will take time “.

Yields are trending up again

The Federal Reserve estimates that the federal funds rate should be at 3.4% at the end of the year, against 1.9% estimated in March, and at 3.8% in 2023, according to the famous “dot plot”. », dot chart illustrating the expectations of the members of the monetary policy committee. Finally, the growth forecast was lowered from 2.8% to 1.7% for 2022, while that concerning inflation was raised from 4.3% to 5.2%.

On the bond market, the yield on the 2-year US bond, which reflects inflation expectations, tightened by 18 basis points to 3.37%, and that of the 10-year maturity by 16 basis at 3.44%. In Europe, the yield on the Italian 10-year bond rose 13 basis points to 3.960% after falling the day before in anticipation of the creation by the ECB of an anti-fragmentation tool, which should be presented in July. . The spread with the German Bund of the same maturity is 2.13%.

Engie weighed down by the drop in gas deliveries

Engie loose 7%. The energy company said it had seen a drop in gas deliveries after the new restrictions on exports decided by Moscow, adding however that the group’s customers were not affected by the situation.

Cyclical and technological stocks show the strongest declines, such as Saint Gobain (-4.2%), ArcelorMittal (-4.4%) and STMicroelectronics (-4.6%).

Ipsen loses 3.7%. Morgan Stanley lowered its target price on the title of the pharmaceutical group from 90 to 80 euros, maintaining its opinion of “underperformance”.

Conversely, Euronext increased by 3%. JPMorgan raised its recommendation on the stock market platform from “neutral” to “outperformance” to target 101 euros.




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