Red to end the week. The Paris Bourse lost, this Friday, the gains it had garnered yesterday. the Cac 40 closed the session down 1.12%, at 6,926.63 points. Over the week, he lost nearly 1% when he returned yesterday to 2% of his November records. The monetary policy decisions of the US Federal Reserve and the ECB came out perfectly in line with expectations.
Faced with inflation, where Erdogan’s Turkey decided yesterday to further lower its interest rates, against good economic intelligence (which created a stir on the Istanbul Stock Exchange, which is now plunging hui of 9% in local currency, -13% in dollars), the American central bank announced, Wednesday evening, at the end of its meeting of monetary policy of two days, the acceleration of the pace of the reductions of purchases assets, before a complete shutdown in March. From June, the key interest rate will be raised. US central bankers predict three rate hikes next year (0.25% each time), then three more in 2023 (five of the eighteen members of the monetary policy see four and three see five) and two in 2024, which would bring the fed funds rate to just below its long-term average.
“There is nothing really aggressive about the tightening cycle as described in the US Monetary Policy Committee’s midpoint scenario. It resembles the gradual normalization cycle conducted from 2015 to 2018, comments Bruno Cavalier, at Oddo BHF. This does not cause long rates to react violently. “
The fact remains that the decision of the Fed, but also of the Bank of England, to raise the rates puts under pressure, on the stock market, the companies of the sector of the “tech”, in strong growth, and which, to finance this strong growth , need to borrow.
STMicro and banks among the biggest drops
“If we move towards an environment in which interest rates rise, high growth stocks will become less attractive”says Dennis Dick, trader at Bright Trading LLC. Florian Roger, head of research at Exane Solutions, a subsidiary of the investment company Exane BNP Paribas, specializing in derivatives, predicts a rotation towards “value” stocks next year.
“While the Federal Reserve is showing more offensive on the monetary plan, investors are reducing their exposure to growth stocks”, adds Jim Paulsen, chief investment strategist at The Leuthold Group. An upward adjustment in the discount rate for future cash flows automatically leads to a drop in the valuation of technological stocks on which it is based.
In this context, the chipmaker STMicroelectronics dropped 1.26% on the Cac 40 (-2.3% over the week).
First up nearly 3% this morning, Hermes, another growth stock, ended with a drop of 6%.
The banks gave up 1 to 2%, due to the Turkish risk.
On the SRD, the specialist in diagnostic tests bioMérieux lost 3.4%. Its Italian competitor DiaSorin announced this morning that its sales of Covid tests were expected to drop by 60% next year. DiaSorin plunged 10% on the Milan Stock Exchange.
In Germany, 2022 growth revised downwards
There was little news on the economic front on Friday. In Germany, the Ifo business climate index decelerated slightly for the month of November, to 94.7 points, against 96.5 in October and 95.3 expected by the consensus. The Bundesbank has lowered its growth forecast for 2022.
In Japan, the BoJ – the last major central bank to release its monetary policy decision – kept its short-term rate target at -0.1% and that of 10-year bond yields around 0%. But it will cut its purchases of corporate bonds and commercial paper back to pre-pandemic levels starting in April.