(CercleFinance.com) – Some profit-taking brings a note of heaviness in Europe on this eve of the ‘4 witches’: the Paris stock market fell by 0.7%, towards 7,280 (in tiny volumes) but the loss exceeded – 1% before the opening of Wall Street.
In New York, operators are keen to end the 1st half on a high note: the Dow Jones gained 0.8%, the S&P500 0.6% (instead of falling -0.2% in pre-opening) the day after the announcements from the Fed, which admittedly left its rates unchanged but also dampened hopes of further monetary easing (and even before 18 months to 2 years).
Thus, the FED signaled without the slightest ambiguity that the process of monetary tightening would continue, without setting a timetable, but two additional rate hikes remain on the table.
This last element briefly destabilized the Wall Street indices because investors were hoping for a more accommodating message, which had also contributed to several sessions of increases for the stock market indices (the Nasdaq-100 returned to 15,000 and posted +38% this year).
After the FED yesterday, it was the ECB’s turn to speak: no break in July (no discussion in this direction) in the tightening cycle of the 3 key rates (the ‘repo’ is increased to 4%) because it is revising its ‘core’ inflation expectations sharply upwards in 2023 (from 4.6% to 5.1%) and 2024 (from 2.6% to 3%) due to the sharp rise in wages observed in the Eurozone, particularly in Germany (after union negotiations) before falling to 2.3% in 2025.
The ECB rules out the scenario of a recession and anticipates 0.9% in 2023 then 1.5% in 2024…a very marginal improvement to 1.6% in 2025.
It will therefore take much longer than expected (‘inflation too high, too long’) to return to the 2% target, but the ECB rules out any change in inflation target (towards 3% for example).
In the United States, the US figures appear contradictory since manufacturing activity in the New York region rebounded unexpectedly in June: the Empire State index climbed to +6.6 after -31.8 in May (against -15 expected) but conversely, the index of manufacturing activity in the Philadelphia area (Philly Fed) fell from -10.4 last month to -13.7 in June, its 10th consecutive negative reading, reflecting a worsening of the sector’s contraction.
The new orders index fell two points to -11, its 13th straight negative reading, but the current shipments index rose 15 points to +9.9, reaching its highest level since January.
Retail sales rose 0.3% in May in the United States while they were expected to fall 0.1% after rising 0.4% in April.
Excluding cars and fuel, they rose by 0.4% whereas they were expected to fall by 0.3%, after an increase of 0.5% in April.
Industrial production fell 0.2% in May in the United States after rising 0.5% in April. It was expected to rise by 0.1%. The production capacity utilization rate fell more than expected to 79.6% against 79.7% expected after 79.8% in April.
Finally, the number of weekly jobless claims is unchanged at 262,000 last week in the United States, instead of 250,000 expected.
On the bond side, it is rather the ‘fait accompli’ that prevails but a slight tension is emerging with OATs which show 3.025% against 2.975% or Bunds with +6pt at 2.503%… and T-Bonds are improving with -4.5 Pts at 3.765%.
This weighs on the Dollar which drops -0.8% and falls back towards 1.09200 against the Euro (a support is tested).
Lower rates and the greenback favor a +1% rebound in gold from 1.926 to $1.951/Oz (not enough to return to the former support of $1.965)
In the news of French companies, Alstom announces that its first regional hybrid train (electric-thermal-battery) ran in test mode at the beginning of April on the Toulouse-Mazamet and Toulouse-Rodez lines. Its commissioning could be effective within a few months.
Engie announces the creation of a new brand, Engie Vianeo, with the aim of responding, as of this summer, to the growing needs of users of electric vehicles circulating in France.
Voltalia indicates that its subsidiary Helexia has concluded an agreement with Comerc Energia providing, for a period of 20 years, the supply of a maximum of 90 megawatts of photovoltaic solar energy distributed over a series of decentralized production projects in Brazil.
Finally, Saint-Gobain announces that it has reached an agreement to acquire Hume Cemboard Industries (HCBI), a leading player in the cement board market for a wide range of applications (facades, partitions and ceilings) in Malaysia. .
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