(CercleFinance.com) – The Paris Stock Exchange (-3% towards 7,475) records a second session of sharp decline in a row (the 4th out of 5) and falls by -5% in 48 hours.
The index is undergoing its most brutal weekly correction since the end of February 2022, with a score flirting with -6%, against a backdrop of political uncertainty and questions about rates.
The Euro-Stoxx50 (-1.9%) pulverizes the support of 4,900 and loses 4.2% over the week, which also promises to be the worst in 27 months.
Wall Street reopened with a moderate decline with an S&P500 at -0.3% around 5,420 points and which garnered +1.6% weekly (+14% since January 1), or a Nasdaq (unchanged) which could well achieve an upward 5/5 for a weekly gain of +3.1%.
This represents a historic differential of almost 9% with the CAC40: an unprecedented score over a single week in the 21st century.
Hit hard by the results of the European elections and the announcement of the dissolution of the National Assembly, the Parisian market has been in the red since January 1 (-0.2%).
The markets fear that the vagueness surrounding the outcome of the next legislative elections, with the possible coming to power of the RN (or according to the admission of many strategists, the worst hypothesis would be ‘the Popular Front’ version 2024), will lead investors to stay away from French stocks for several months.
Already weakened by the downgrading of France’s rating by S&P, the French government’s 10-year borrowing rate has increased by more than 25 basis points since Sunday to now stand at 3.16%.
Over one week, the gap with Germany widened significantly to reach almost 80 basis points (+77 points in 5 sessions), which illustrates the mistrust of investors.
Our OATs show -1Pt at 3.1700%, Bunds -14.5Pts at 2.35%: a real wind of panic is beginning to blow over our issues; the most ‘comparable’ which are the Italian BTPs relax from -2.5Pts to 3.92% and show a +20Pts premium compared to the Bunds.
‘We expect the election campaign to cause stock market jolts, but nothing too bad and nothing lasting, in our opinion,’ says Christopher Dembik, investment strategy advisor at Pictet AM.
‘The lesson we can learn from recent years is that we must never exaggerate the influence of politics on the medium-term performance of the financial markets of developed countries (examples: Brexit, Trump etc.) ‘, adds the analyst.
“Recent history has taught us that volatility on European bond markets is often fleeting,” adds Guillaume Truttman, manager at Eiffel Investment Group.
The professional, however, cannot help but draw a parallel with the debt crisis which shook the euro zone during the years 2011-2013.
‘What may seem like a poker move on the part of Emmanuel Macron is today fueling political uncertainty which has, in the past, left bad memories for European investors when the risk of a fragmentation of the euro zone was acute’, he recalls.
Added to this are fears about the trajectory of the Fed’s monetary policy, which could result in fewer rate cuts than expected in the months to come.
The only reason for satisfaction of the week, the latest statistics showed that inflation was better controlled in the United States, which reinforces the scenario of a ‘soft landing’ for the American economy this summer.
Import price figures fell by 0.4% in May compared to the previous month (and are perfectly stable excluding petroleum products).
At the same time, export prices fell by 2.1% (and -2.1% also excluding foodstuffs), according to the Labor Department.
Over 12 months, i.e. between May 2023 and May 2024, US import prices increased by 1.1% (+0.5% excluding petroleum products) and export prices increased by 0. 6% (+1.5% excluding foodstuffs).
US T-Bonds took the opportunity to relax from -3.2Pts to 4.208% or -22Pts on a weekly basis.
In France, consumer prices are stable over one month in May 2024 and increase by 2.3% over one year (after 2.2% in April 2024) according to INSEE. This slight increase in inflation results from a further acceleration over one year in energy prices (+5.7% after +3.8%) linked to a base effect on the prices of petroleum products (+2 .9% after -0.7%) according to INSEE.
Finally, the Euro fell by -0.6% towards 1.0680 against the Dollar and lost 2% over the week.
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