EUROPE FINISHES IN THE RED, INFLATION WORRIES
by Claude Chendjou
PARIS (Reuters) – European stocks ended lower on Wednesday and Wall Street was also trading in the red mid-session amid rising inflation and fears of an acceleration in interest rate hikes. which could affect the economic situation and the results of companies, the American distribution group Target being the latest to have suffered from the increase in costs.
In Paris, the CAC 40 ended down 1.2% at 6,352.94 points. The British Footsie lost 1.07% and the German Dax 1.26%.
The EuroStoxx 50 index fell by 1.36%, the FTSEurofirst 300 by 1.13% and the Stoxx 600 by 1.14%.
Even if the rise in prices stabilized in April in the euro zone at 7.4% over one year, so-called core inflation, which excludes energy and unprocessed food products, stood at 3, 9% on an annual basis after 3.2% in March, nearly double the European Central Bank’s (ECB) target of 2%, which should lead it to start raising its rates from July.
In the United Kingdom, where monetary tightening is already at work, inflation reached 9.0% year on year in April, a level not seen since the end of the 1980s.
In the United States, traders expect a half-point hike in the cost of credit at 85.3% at the US Federal Reserve meeting next month, as its chairman, Jerome Powell, said that the central bank would raise rates as high as needed to curb inflation even if that meant curbing growth.
In this context, the rebound recorded by the equity markets on Tuesday is seen by many investors as a flash in the pan.
“Investor sentiment and confidence remain fragile and as a result we are likely to see volatile and choppy markets until we get more clarity on rates, recession and risk,” comments Mark Haefele, chief financial officer. investments at UBS Global Wealth Management.
The VIX volatility index in the United States is rising again, by 10%, after six consecutive sessions of decline. Its European equivalent ended with a gain of 5.27%.
AT WALL STREET
At the time of the close in Europe, the Dow Jones fell by 2.21%, the Standard & Poor’s 500 by 2.56% and the Nasdaq by 2.76%.
All major sectors of the S&P-500 are in the red, with consumer goods and non-essential goods and services each down about 3.5% in response to Target results.
The American distributor reported a quarterly profit cut in half by the rise in prices, which plunged the action by nearly 25%. In its wake Gap, Kohl’s, Nordstrom, Costco, Best Buy and Macy’s fell from 7.6% to 10.8%.
Technology groups, Microsoft, Apple, Alphabet, Meta Platforms, Tesla and Amazon, which fell from 1.7% to 4%, are for their part penalized by expectations of rising credit costs.
“The market is very concerned about rising rates and the possibility of the Fed weakening the economy,” said Brooke May, partner at Evans May Wealth. “Higher rates are obviously going to eat away at consumer spending, in addition to corporate earnings, and the market is just trying to digest that,” she adds.
VALUES IN EUROPE
On the pan-European Stoxx 600, apart from energy (+0.91%) and defensive compartments such as real estate (+0.26%) and utilities (+0.68%), all other sectors ended in retreat.
The two compartments of so-called essential (-1.76%) and non-essential (-2.09%) consumption suffered one of the largest declines in the wake of the plunge by the American distributor Target. Carrefour gave up 4.42%.
Other publications of financial accounts led the trend, such as the stock market operator Euronext, which gained 3.85% after better-than-expected results and cost control.
The British luxury brand Burberry was carried by its outlook, while the collective catering group Elior suffered from the lowering of its annual forecast precisely because of inflation.
The results of the Dutch bank ABN Amro (-11.88%) were also disappointing.
In merger operations, Commerzbank shares ended with a gain of 3.08% after a press report evoking discussions at the beginning of the year with the Italian bank UniCredit.
Air France-KLM gained 4.87% on an airfreight partnership with shipping group CMA CGM and Siemens Energy benefited from speculation over a bid for Siemens Gamesa.
On the SBF120, the Orpéa share fell by 19.17%, the group having announced that it had filed a complaint against X for potentially criminal acts, in response to press information. Its competitor Korian lost 4.4%.
CHANGES
The dollar advanced 0.20% against a basket of benchmark currencies, benefiting from renewed risk aversion the day after its biggest drop in one session for more than two months.
The euro, down 0.37%, is trading at 1.0508 dollars, the single European currency not having reacted in the wake of the publication of inflation figures.
The pound rose to $1.2501 after rising 1.4% on Tuesday, its best session since the end of 2020, before returning to 1.2410 after the inflation figures.
In cryptocurrencies, bitcoin lost 4.72% to 29,013 dollars, penalized by caution on risky assets.
RATE
In the bond market, the ten-year German Bund yield fell almost four basis points to 1.013% and the two-year one ended at 0.378% after hitting a high since November 2011 at 0.444%.
The German bond rate had benefited the day before from comments by Klaas Knot, the president of the Dutch central bank, who raised the possibility of a half-point increase in the deposit rate of the European Central Bank (ECB). in July.
The yield on ten-year Treasury bonds for its part lost 4.6 points, to 2.924%, after having also benefited the day before from the latest statements by the President of the American Federal Reserve, Jerome Powell.
OIL
The oil market is volatile, with investors torn between hopes of a rise in demand in China as some health restrictions are lifted in the country and the European Union’s plan to mobilize up to 300 billion euros in investments by 2030 to end its dependence on Russian oil and gas.
The barrel of Brent lost 1.97% to 109.77 dollars and that of American light crude (West Texas Intermediate, WTI) 1.9% to 110.21 dollars.
(Report Claude Chendjou, edited by Jean-Michel Bélot)