(CercleFinance.com) – The Paris stock market is sinking 40 minutes from the close, the loss reached -1.1% and the CAC40 is threatening the support of 6,400.
The heaviness is spreading across Europe with a Euro-Stoxx50 down -0.7% while the S&P500 sinks by -0.4% and the Nasdaq by -1.4% below 12,400 (in the wake of of LYFT which plunged -36%).
The Fed must indeed announce the conclusions of its monetary policy meeting in a press release which will be published at 8:00 p.m. (Paris time), before a press conference held by its president Jerome Powell.
While a 50 basis point rise in its key rates is already largely priced in, the main issue remains the pace of reduction in the size of its balance sheet: a rate of asset sales of $90 billion to $100 billion per month will dry up liquidity but it is desired.
The impact will be mitigated by the sharp increase in tax receipts due to the very strong growth observed in 2021, which will reduce US Treasury issues to finance the twin deficits (fiscal and trade).
Inflation, evidenced by a series of indicators published in recent weeks, pleads in favor of a rapid tightening, but the slowdown in growth that is looming calls for a more measured approach.
Many operators are thus hoping that the Fed boss will signal this evening that the central bank is ready to temporize its action in order to adapt to the recent deceleration in activity.
This type of announcement could help calm the markets, which have recently been disturbed by the threat of lasting ‘stagflation’, ie the combination of weak growth and high inflation.
In terms of statistics, investors took note of the growth in activity in the American ‘services’ sector, which turned out to be weaker than expected in April.
The Institute for Supply Management (ISM) monthly survey released on Wednesday fell to 57.1 last month from 58.3 in March, while economists expected a small rise around 58.5 .
It was the new orders component that suffered the sharpest decline, to 54.6 from 60.1 the previous month, followed by the employment sub-index, which fell to 49.5 from 54.
The component linked to activity and production, on the other hand, rose to 59.1 from 55.5 in March.
Another closely followed figure is the monthly ‘ADP’ survey on job creations in the non-agricultural private sector in the United States: it only generated +247,000 jobs in April, i.e. far from the consensus of + 400,000, after the 479,000 creations in March (revised from an initial estimate which was +455,000).
In particular, the service provision sector created 202,000 jobs (including 77,000 in leisure and hospitality, as well as 48,000 in education and health), while the goods production sector generated 46,000.
The trade deficit of the United States exploded by +22.3%, to 109.8 billion dollars in March, compared to that of 89.8 billion the previous month (which was revised from 89.2 billion in initial estimate), according to the Commerce Department.
This heavy month-on-month deterioration reflects a 10.3% surge in imports of goods and services to $351.5 billion, which could not be offset by a 5.6% growth in exports, to 241. 7 billions.
In France, publication this morning of the S&P Global composite PMI index of global activity. It recovered from 56.3 in March to 57.6 in April, signaling the strongest growth in French private sector activity since the start of 2018.
This trend mainly reflected the dynamism of the services sector, where the expansion accelerated for a third consecutive month, while manufacturing production increased moderately during the month.
‘Once the catch-up effect linked to the post-pandemic rebound has passed, a slowdown in growth seems very likely’, warns S&P Global, adding that ‘inflationary pressures are also weighing heavily on the outlook’.
On the bond side, Treasury bills confirm the record yields observed the day before, the OAT shows +3Pts at 1.5050%, the same difference on the Bund at 0.985%, Italian BTPs soar by +10Pts at 2.948% and Bonos Spanish +6pts at 2.067%.5
Across the Atlantic, T-Bonds rose by +3pts to 2.983% and in Australia, the 10-year bond posted +6pts to 3.465% (the central bank had raised its key rate by +25% to 0.35% the day) after peaking at 3.57%, from 3.25% on Monday.
In the news of French companies, EDF reveals for the first three months of 2022, a strong increase in turnover of 61% in organic terms, supported by electricity and gas prices in a context of high wholesale prices, as well as the good performance of EDF Trading.
Maisons du Monde announces quarterly performance ‘in line with forecasts’. The specialist in decorative items and furniture for the home says it generated sales of 313 million euros in the first three months of the year, a globally stable figure year-on-year (-1.3%).
Finally, Solvay publishes for the first quarter of 2022 an underlying net profit up 54% to 369 million euros and a record underlying EBITDA of 712 million, organic growth of 20%, despite the cost inflation.
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