(CercleFinance.com) – The Paris Stock Exchange starts the session in decline on Wednesday morning, despite the easing of fears around the consequences of the collapse of SVB which had shaken the equity markets in recent days. The CAC40 index is down 1.8% to 7010 points.
After vegetating around equilibrium throughout yesterday morning, the Paris market had finally taken off at midday to end the session with a gain of 1.9% to 7141 points, a performance which enabled him to make up for a good part of his heavy losses the day before (-2.9%).
After some scares, investors regained some appetite for risky assets yesterday as fears of a domino effect linked to the bankruptcy of SVB eased.
‘This recovery is taking place because investors are beginning to realize that the bankruptcy of SVB will not lead to the emergence of systemic risk’, explain analysts at Danske Bank.
The signs of easing tensions on the side of the American financial system benefit the major European banking stocks, which climbed 2.5% yesterday, signing the third largest sectoral increase in the Old Continent.
The ebb of concerns about a possible contagion effect of the SVB crisis mainly benefited American markets.
Despite lackluster inflation figures, the Dow Jones rose 1.1% last night, while the Nasdaq climbed more than 2.1%.
Another encouraging element, the CBOE volatility index, often nicknamed the barometer of fear on Wall Street, fell sharply to return to lows of almost a week.
The trend could well be volatile today with the release of a series of indicators that will help determine the evolution of the monetary policy of the major central banks.
In Europe, investors took note of the latest inflation data in France. The consumer price index (CPI) increased by 1.0% over one month in February 2023, after +0.4% in January. Inflation thus rose to 6.3% over one year according to INSEE.
In the United States, market participants will follow the New York Fed’s Empire State index, retail sales, industrial producer prices, business inventories and oil inventories.
Investors could nevertheless return to a cautious approach on the eve of monetary policy decisions by the European Central Bank (ECB), which is expected to adopt an ever-restrictive bias.
If a rate hike of 50 basis points seems to have taken place, it remains to be seen whether the institution will explicitly mention a similar increase at the end of its meeting in May or whether it will leave open the possibility of slowing down its next tightenings at 25 dots.
The SVB episode has indeed made investors nervous about the pernicious effects of the rapid monetary tightening orchestrated by central banks, which could well deal a fatal blow to the most fragile institutions.
‘At this stage of the cycle, a little flexibility would be (…) welcome because the risk of credit drying up in the euro zone is increasing’, warns Bruno Cavalier, chief economist at Oddo BHF.
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