(CercleFinance.com) – The Paris Stock Exchange reduced its losses slightly (-0.7% to 7,074 against 1.3% at the day’s lowest around 7,035) and lined up a 4th consecutive session of decline in a context of rising prices. bond yields which are stagnating at their zenith this Tuesday, in the absence of ‘macro’ data likely to cause them to fall again.
The fall of the CAC40 below 7,130, then 7,100 should be enough to validate the start of a consolidation phase.
The trend remains clearly negative on Wall Street with -1% on the S&P500 and -1.2% on the Nasdaq (which confirms the break of 13,350).
Investors are beginning to accept that they may face ‘higher rates for longer’ from the US Federal Reserve.
The optimism regarding the scenario of a ‘soft landing’ of growth, which until recently carried the markets, has given way to a bout of caution given the surge in government bond yields in the wake of the rise in inflation expectations.
The ‘number of the day’ will not dispel fears of a flirtation with recession in 2024: American consumer confidence has deteriorated to 103, compared to 108.7 last month (much higher than expected in September) to reach levels indicative of an upcoming recession.
The Conference Board indicates, however, that the component of consumers’ judgment of their current situation has recovered slightly, to 147.1 against 146.7 last month, that measuring their expectations fell to 73.7 against 83.3 in August …and it is this last variable which is the most striking.
The other concern is the FED’s unprecedented issuance program of $1,000 billion/month: we will have to attract capital with increasingly generous returns, because Europe is also in high demand. of capital (notably Italy and France).
As a result, the yield on 10-year Treasuries reached a new peak yesterday since 2007 above 4.56% (4.5460% at 5 p.m.), a phenomenon which does not spare Europe since that of the German Bund at 10 years is close to 2.80% (2.791% and 2.82% at the highest a few minutes ago), our OATs also deteriorated by +1Pt to 3.351% (and 3.37% recently).
Market participants fear that this outbreak of fever will end up pushing the yield on the American 10-year bond towards the 5% threshold, a level considered critical.
On the foreign exchange side, the dollar continues to appreciate against the euro (-0.1%), which yesterday shattered its recent low of 1.0640 to sink towards 1.0590, its lowest since March last.
A sign of the concern of the European stock markets, the index measuring the implied volatility of the Euro STOXX 50 index jumped by more than 12% yesterday, the VIX associated with the S&P500 is now testing the 18 (at 17.95 , more than 3% safety margin before rocketing towards 25 or 30).
Nervousness is also fueled by the specter of a partial closure of federal administrations in the United States (‘shutdown’) from October 1, following the recent blocking by Republican elected officials of a text relating to defense spending.
Investors, currency traders, will also be monitoring a battery of indicators in the coming days, including new data concerning inflation in the euro zone and the United States, culminating in the ‘CPI’ expected on Friday.
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