” Geopolitical tensions, high inflation, declining consumer confidence, uncertainty over rate hikes and unprecedented quantitative tightening and their effects on global liquidity are very likely to have negative consequences for the Mondial economy. This warning, issued by the boss of the powerful American bank JPMorgan, Jamie Dimon, is in no way a surprise but he still threw a chill on the financial markets. Especially since the establishment, the largest in the United States by assets, disappointed by announcing that its profit for the second quarter was cut by 28% due to provisions made to cover possible losses linked to the risk of recession. Exactly, it recorded 1.1 billion dollars (as much in euros) of provisions, whereas last year, 3 billion dollars had been released from provisions. In New York, the title fell by 4%. His sister Morgan Stanley is hardly in better shape: its share fell by 1.4%. Penalized by a sharp slowdown in investment banking and mergers and acquisitions advisory activity in a context of high market volatility, the bank saw its profit fall to 2.4 billion dollars (as much in euros), i.e. $1.39 per share for the quarter ended June 30, compared with $3.4 billion, or $1.85 per share, a year earlier. All this bodes ill for Citigroup and Wells Fargo, which must comply with the quarterly exercise on Friday at the same time as the world leader in asset management BlackRock.
On the stock market, operators continued their withdrawals, those who were already cautious in the face of the growing risk of recession. The stronger-than-expected acceleration in US inflation to 9.1% year on year in June and the producer price index to 11.3% over the same period did not support the thesis that the US Federal Reserve (Fed) will hit hard again at its June 26 and 27 meeting, even if it means sacrificing growth. Previously dominant, the scenario of a 75 basis point hike, as in June, now gives way to a mega-rise of 100 basis points, if we judge by the CME Group’s Fedwatch barometer. This implied probability is now 83.3%, compared to 0% a week ago.
Oil at lowest since Ukraine invasion
This is not likely to reassure operators, especially since the European Commission has lowered its growth forecasts for the euro zone to 2.6% this year and 1.4% in 2023, while raising those of the inflation 7.6% in 2022, against 6.1% initially forecast. At the close, the Bedroom 40 loose 1.41%, to 5,915.41 points, in a volume of transactions of 2.8 billion euros (holiday of July 14 obliges). On the other side of the Atlantic, the ambient gloomy results in a 1.3% drop in the three major indices Dow Jones, Nasdaq Composite and S&P500. On the foreign exchange market, the single currency revolves around parity with the dollar. Finally, oil is falling on fears of an impending recession. North Sea Brent crude sinks below $100 after hitting 94.5, its lowest since Russia’s invasion of Ukraine, hurting TotalEnergieswhich ended on a fall of 4.66%.
Among other values, Arkema dropped 3.43% after UBS downgraded its opinion from “neutral” to “sell” and reduced its target price from 128 euros to 82 euros.
On his side, Atos lost 4.56%. S&P Global Ratings lowered the SSII’s credit rating from “BBB-” to “BB”, bringing it back to the category of junk bond (speculative bond). This downgrade comes with a negative outlook, following the group’s plan to split its business into two separate legal entities.