The Paris Stock Exchange started the week down, erasing its gains from the previous two sessions, while Wall Street fell in early trading. The specter of new health restrictions in China after the appearance in Shanghai of a new sub-variant of Omicron indeed raises fears of a slowdown in the global economy. Especially since Macau, the Chinese Las Vegas, has confined its population and closed its casinos and non-essential businesses for a week. Against this backdrop, China’s second-quarter GDP figures will be the center of attention on Friday.
The possible disruption of Russian gas supplies is also weighing on the trend as the Nord Stream 1 gas pipeline, through which most of the Russian gas destined for Europe passes, was closed on Monday for maintenance operations which should last ten days. The scenario of a total shutdown of Russian gas supplies is judged as ” most likely by the government, said Bruno Le Maire on the sidelines of a conference during the Aix-en-Provence meetings this weekend.
Around 4 p.m., the Bedroom 40 lost 1% to 5,973.29 points in a limited business volume of barely 1 billion euros. In New York, the Dow Jones yields 0.54% and the Nasdaq Composite 1.95%. Twitter fall of nearly 7% following the decision of Elon Musk to abandon his plan to buy the social network for 44 billion dollars. Casino stocks are also down. Las Vegas Sands and Wynn Resorts lose more than 6%.
Fed hawks ready to take back control
The luxury sector, as well as the major cyclicals and those linked to raw materials, are particularly affected. LVMH and Kering yield between 1% and 1.4%. ArcelorMittal and Saint Gobain fell by 2.1% and 3.3% respectively. TotalEnergies and Engie are also falling, but to a lesser extent. In Frankfurt, Unite plunges nearly 16%.
Stronger-than-expected U.S. jobs data for June certainly reflects the resilience of the U.S. economy, but it also bolsters the prospect of a 75 basis point tightening of the Fed funds rate at the end of the month after that of the same magnitude decided in June. As a result, the yield on the 10-year US bond rose back above 3% and is trading at 3.0225%. The 2- and 5-year maturities continue to reflect an inversion of the yield curve, generally interpreted as a sign of a coming downturn in the economy.
In Europe, the yield on the German 10-year bond, which is a reference in the euro zone, on the contrary eased by 9 basis points to 1.250%. Five-year inflation expectations five years ahead fell below 2% in the bloc for the first time since March on fears of a recession in Europe. This risk, combined with a more aggressive Fed, is supporting the US currency, which continues to strengthen against the single currency. The latter touched a new low of 20 years at 1.0059 dollars, thus approaching parity.
Danske Bank’s warning weighs on the sector
Investors will follow, on Wednesday, the evolution of consumer prices in the United States in June, whose rise should have accelerated to 8.8% over one year, a new peak of 40 years, after 8.6% in May . If that is the case, ” or if the increase is even more marked, the ‘hawks’ of the Fed will resume their pursuit. We will likely see US yields tighten further, and that should force investors to return some of the gains from last week. sums up Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Banks are under pressure after Denmark’s Danske Bank lowered its profit forecast for the full year due to rapidly rising interest rates and difficult financial market conditions. BNP Paribas, Agricultural credit and Societe Generale yield between 2.6% and 3.2%.
EDF supported by a note from JPMorgan
STMicroelectronics shows a limited decline. The Franco-Italian chipmaker and GlobalFoundries have announced the creation of a new semiconductor factory in France. The two groups declare that it is an investment of several billion euros which will benefit from the support of the State, without specifying the exact amount.
Sanofi takes 0.7%. The pharmaceutical group has reported positive data from a phase III study concerning a treatment for adults and adolescents with severe hemophilia A or B.
EDF gains 0.8%. JPMorgan raised its recommendation on the electrician from “underweight” to “overweight”. The broker also raised its price target from 7.60 to 12 euros, believing that the nationalization desired by the French government will be done via a purchase offer rather than by the vote of a text of law in Parliament “ This means that minority shareholders can expect a premium to speed up the process », Indicates the author of the note.
Airbus rises by 0.7%. The aircraft manufacturer announced that it delivered 295 aircraft over the first six months of the year and won 259 net orders over the period.