(BFM Bourse) – The Paris Stock Exchange lost the ground gained the day before. The CAC 40 lost 0.35% on Tuesday evening, as the Bank of Japan announced an unexpected monetary policy adjustment perceived as restrictive by the market.
Full reverse. The Paris Bourse lost 0.35% to 6,450.43 points on Tuesday evening undermined by an unexpected monetary policy adjustment from the Japanese central bank.
The latter decided on Tuesday to relax the control of yields on Japanese public debt. The institution will now tolerate a variation in 10-year Japanese debt yields of between +0.5% and -0.5%, i.e. double before, compared to its target rate of 0%.
The Parisian place gives way to the ground conquered the day before (+0.32%) after this raising of tone of the Japanese monetary institution. Last week, the firmness of the presidents of the American Federal Reserve (Fed), Jerome Powell, and of the European Central Bank, Christine Lagarde, in their fight against inflation had caused the world indices to fall, including the CAC 40 which had lost 3.4% in the past week.
The Bank of Japan, the last of the Mohicans
Bank of Japan Governor Haruhiko Kuroda assured that this was not a rate hike, nor the first step in an exit from Japan’s very accommodative monetary policy where inflation has reached 3.6% over one year in October. A figure certainly relatively low compared to that of other developed countries but higher than the 2% targeted by the Bank of Japan.
Despite Haruhiko Kuroda’s statements, investors did not appreciate this decision, the Tokyo Stock Exchange closing down 2.5%.
The Bank of Japan’s announcement “is widely seen as the start of a potential end to its ultra-loose monetary policy,” note strategists at Deutsche Bank.
“It is important not to underestimate the impact this could have, as a tightening of Bank of Japan policy would remove one of the last global anchors that has helped to maintain, more broadly, the borrowing costs at low levels”, they add, recalling that the Japanese institution has so far been an exception compared to the other major central banks, which have entered a cycle of monetary tightening. “The markets have been caught on the wrong foot,” said Michael Hewson of CMC Markets.
Engie in the gas
As for values, Engie fell 3.3%, after announcing that Belgium had asked it to increase its past provisions by 3.3 billion euros for the cost of dismantling the nuclear fleet across Quiévrain.
The company has also published an assessment of the impact of the laws transposing the European agreement capping revenue from electricity produced from “inframarginal” technologies. These technologies include electricity generated by lower cost energies (nuclear, renewable energy). Engie estimates that the European cap will have an impact on its operating profit of 700 to 900 million euros in 2022, then of 1.2 billion to 1.5 billion euros in 2023.
On the other side of the spectrum, Elior appreciated by 3.9% after announcing a project to acquire the multiservices branch of Derichebourg, which for its part fell by 1.5%. This acquisition will be carried out entirely by exchange of shares, and will enable Derichebourg to rise to more than 48% of the capital of Elior.
On other markets, the euro advanced 0.2% to 1.0631 dollars. Oil prices have turned down. The February North Sea Brent contract fell 0.7% to $79.24 a barrel. That of February on the WTI listed in New York lost 0.2% to 75.25 dollars.
Sabrina Sadgui – ©2022 BFM Bourse