The Paris Stock Exchange fell for the second consecutive session, the decline in equities being accompanied by that of the bond market. The surge in US producer and consumer prices indeed reinforces the prospect of an aggressive move by the Fed at the end of the month. The quarterly results of US banks are also disappointing. The market is more sensitive to earnings disappointments, notes Invesco’s Georgina Taylor. ” There is potentially a lopsided reaction to bad news at the moment, which could add fuel to the fire “, she continues.
JPMorgan Chase dropped 4% in New York after announcing the temporary suspension of its share purchases to strengthen its capital in the face of the deterioration of the economic environment. The bank reported earnings per share of $2.76, against 2.88 expected. Morgan Stanley (-3.6%) was affected by the sharp slowdown in its investment banking division. Its net profit per share was $1.39, 14 cents below the consensus. In Paris, BNP Paribas, Agricultural credit and Societe Generale lose between 2.7% and 3.8%.
The EC lowers its growth forecasts
Shortly after 4 p.m., the Bedroom 40 fell 1.94% to 5,883.91 points in a listless business volume on this national holiday with 1.4 billion euros traded. In Milan, the FTSE Eb fall of 3.47%, affected by political tensions after the refusal of the 5 Stars party to vote for a package of aid measures, thus threatening the government of Mario Draghi. On Wall Street, the Dow Jones and the Nasdaq Composite down nearly 2%.
The European Commission lowered its growth forecast for the euro zone to 2.6% this year and 1.4% in 2023, from 2.7% and 2.3% respectively estimated in June. Inflation is expected to reach 7.6% in 2022, against 6.1% initially forecast. On the foreign exchange market, the euro settled below parity at 0.9975 dollars after a low point at 0.9952.
The yield on the 2-year US bond, the most sensitive to changes in Fed rates, remains above the 10-year maturity, at 3.2235%, against 2.9873% for the second. This yield curve inversion dynamic, which generally heralds a recession, is the most marked since 2000.
Brent sinks below $100
According to CME Group’s Fedwatch tool, the market is pricing an 85.7% chance of a 100 basis point hike in the Fed funds rate on July 27, following a 75 basis point hike in June. Jerome Powell recently insisted on the Fed’s “unconditional” determination to fight inflation, even at the risk of a recession.
Expectations of monetary tightening by the Fed are also weighing on oil prices due to fears of reduced demand in the face of the risk of recession. Brent crude from the North Sea sinks below $100 after hitting 65.01, its lowest since Russia invaded Ukraine in late February. Prices have fallen more than 20% since the June highs. TotalEnergies give up 5% and Vallourec 5.7%.
UBS downgrades the chemicals sector
Arkema 5% drop. UBS has downgraded the entire European chemicals sector in this period ” brittle because of the risks of energy rationing and deterioration of consumer confidence. The broker went from “neutral” to “sell” on the title.
Atos bend of 5.4. S&P Global Ratings on Wednesday lowered the SSII’s credit rating from “BBB-” to “BB”, bringing it back to the junk bond category. This downgrade comes with a negative outlook, following the group’s plan to split its business into two separate legal entities.
Air France-KLM appreciated by 1.2%. The airline has announced that it has signed a definitive agreement with the Apollo fund which will allow the Franco-Dutch airline group to receive an investment of 500 million euros.