(CercleFinance.com) – The Paris stock market (-1.7%) accelerated its decline after the publication of the American ‘PPI’.
The CAC40 which had saved the 6,000Pts the day before after the ‘CPI’ is now struggling to save the 5,900 points, in volumes which remain very limited on this national holiday.
The Euro-Stoxx50 lost more than -1.7%, below 3,400 Pts, weighed down by the Milan stock market falling by -3.2% while Mario Draghi, highly contested for a whole series of very unpopular health decisions and his lack of support for the most disadvantaged who are being crushed by inflation, could suffer a vote of no confidence from the Senate (with the loss of the support of the ‘5 star’ formation) and would find themselves forced to resign… attempt to form a new majority coalition.
Wall Street has just reopened sharply down, the Dow Jones fell -2% (towards 30,200 Pts) weighed down by banking stocks, the S&P500 by -1.9%.
The other ‘fact of the day’ is the start of the quarterly with the major US banks… and the disappointment is flagrant.
JP-Morgan (-4.5%) announced a decline of -28% in its results with the increase in provisions for possible or probable incidents in its lending activity, turnover fell by -11%, l ‘fusac’ and ‘IPO’ activity collapsed.
Morgan Stanley (-3%) announces a fall of -29% in its profits (increase in provisions), with a plunge of -55% in its ‘investment banking’ activity (almost no more IPOs or launch of SPAC ).
The other ‘highlight’ concerned inflation: no one expected a ‘good surprise’ with the ‘PPI’ on Thursday, the day after a record CPI of 9.1%.
The Department of Labor published producer prices in the United States up 1.1% in June to 11.3% year-on-year, and +0.3% excluding food, energy and commercial services (at 6 .4% annualized, after +6.7% in May… this is the only ‘least worse’ indicator unveiled this week).
Not enough to call into question the scenario of an increase of +100Pts and not +75Pts on July 27th.
The yield on US T-Bonds therefore tightened by around ten points across the entire curve.
This deterioration is confirmed despite jobless claims which increased unexpectedly by +9,000 in the United States during the week to July 9, to 244,000.
While the yield curve had flattened on US Treasury bonds since the beginning of July, the gap is widening again in favor of 2 to 7-year maturities, which are posting a ‘premium’ of 25Pts (‘2years’ at 10Pts ‘7 years’) compared to ’10 years’, with ’12 months’ almost at parity at around 3.00%.
The rise in rates is spreading on the European markets with +6Pts on our OATs at 1.725, +4.5Pts on Bunds (1.198%)… but attention is focused on Italian BTPs which are deteriorating dangerously by +22Pts towards 3.455%, ie a ‘spread’ which deviates sharply to +225Pts compared to the Bund.
The ECB must absolutely do a ‘no fault’ in a week by raising its interest rate for the first time in 10 years and by presenting an ‘anti-fragmentation’ tool which will convince traders.
While the outlook for rising prices leads the EU to revise its growth forecasts downwards and to raise the inflation estimate to 8% at the end of 2022, the Euro is being flattened and relapses by -1% towards a new 21-year low at $0.9955.
To make matters worse, Emmanuel Macron confirms that France will run out of energy (it currently delivers gas to Germany) this fall and must prepare for a period of ‘energy sobriety’ (understanding that there will be no no electricity for everyone this winter).
Despite the gas shortage, oil, which appears to be the most convenient substitute for thermal power plants, fell -3% on Thursday to $97.5 (a clearly identifiable support).
On the Parisian values side, Sanofi announces that the phase III trial seeking to evaluate the experimental use of its Dupixent in children aged one to 11 years suffering from eosinophilic esophagitis has reached its primary endpoint.
Atos’ board decided to appoint a new management team effective immediately, while S&P Global downgraded its credit rating on the IT group from ‘BBB-‘ to ‘BB’, still with from a ‘negative perspective’.
Air France-KLM has signed a definitive agreement for a €500 million investment by Apollo Global Management in a specially constituted operating subsidiary of Air France, owner of spare engines.
Finally, Manutan International posted revenue of 231.5 million euros for its third quarter 2021-22, up 15.3% (+15.6% at constant exchange rates and days with a change of +0.3% and a day effect of -0.7%).
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