(BFM Bourse) – The Paris Stock Exchange ends the week sharply lower, caught cold by Jerome Powell’s offensive speech which does not rule out further increases in key rates to fight inflation. The CAC 40 lost almost 1% on Friday evening, erasing its entire lead over the week.
Rough weekend at the Paris Stock Exchange. The CAC 40 finished down 0.96% at 7,045.04 points, after threatening 7,000 points around 4:30 p.m. On a weekly basis, it is therefore a return to square one for the Parisian index which returns to within two points of its level of last Friday (-0.03%).
After two sessions of increases on Wednesday (+0.7%) and Thursday (+1.1%), the atmosphere has radically changed. The Parisian market was caught cold after the speech of the president of the American Federal Reserve on Thursday evening. Jerome Powell put an end to the procrastination on so-called “terminal” rates, namely whether or not a peak on Fed Funds has already been reached. The Fed president clarified that his members were not convinced that key rates were high enough to fight inflation.
“The Fed is committed to implementing a sufficiently restrictive monetary policy to bring inflation down to 2% over time,” said Jerome Powell, who said he was not convinced “of having reached such a position.”
Rising rates
As for the European Central Bank, its president Christine Lagarde declared on Friday that the drop in rates was “not something that will happen in the coming quarters”, but added that maintaining key rates “should be enough to control inflation.”
On the bond market, Jerome Powell’s speech did not go unnoticed. American yields have recovered since the interest rate on the 10-year American debt is at 4.612% whereas it was below 4.50% just two days ago. Just like the interest rate on the 10-year French government bond is at 3.30%, compared to 3.23% on Thursday.
Note that the bond market also reacted to weak market demand for an issue of 30-year bonds by the US Treasury. Information to be compared with a cyberattack on the American branch of ICBC, the largest bank in China. The bank was the subject of a “ransomware” attack (computer attack with a ransom demand, Editor’s note), which disrupted the American bond market.
Luxury fades, spirits also toast
On the value side, Totalenergies escaped the trend (+1.1%) supported by the rebound in oil prices, after their sharp decline of 5% over the week against a backdrop of concerns about global demand.
On the other hand, spirits groups are toasting on the Paris Stock Exchange in the wake of Diageo, which lost more than 12% in London after warning about future demand for alcohol. Pernod Ricard returned 5.8% and Remy Cointreau more than 4%.
Luxury isn’t in great shape either. LVMH (-3.8%), Kering (-3.3%), and Hermès (-1.6%) suffered from the publication of the Swiss Richemont, which announced a half-year result lower than expectations.
Excluding the flagship index, Valneva limits its gains to 0.8% despite obtaining the green light from the United States for its anti-chikungunya vaccine.
On the foreign exchange market, the euro is almost stable at 1.0669 dollars. As for oil, it continues its rebound that began the day before. A barrel of Brent from the North Sea, for delivery in January, appreciated by 2% to 81.63 dollars. Its American equivalent, a barrel of West Texas Intermediate (WTI) for delivery in December, gained more than 2% to $77.34.
Sabrina Sadgui – ©2023 BFM Bourse