by Claude Chendjou
PARIS (Reuters) – European stock markets ended lower on Thursday and Wall Street was also trading in the red mid-session after the European Central Bank (ECB) decided to end its policy of bond purchases on markets and to prepare an interest rate hike in July for the first time since 2011.
In Paris, the CAC 40 ended down 1.4% at 6,358.46 points. The British Footsie lost 1.54% and the German Dax 1.71%.
The EuroStoxx 50 index fell 1.7%, the FTSEurofirst 300 1.32% and the Stoxx 600 1.36%.
Faced with inflation at 8.1% in May at an annual rate, an unprecedented level since the creation of the euro, the ECB decided on Thursday to follow in the footsteps of the main central banks which have tightened their monetary policy for months. by announcing that it wants to raise its key interest rates by 25 basis points on July 21 and by indicating that it expects a further increase in September, which could be greater.
While the move was widely expected, the possibility of a half-point rate hike in September weighed on investor sentiment, heightening fears of a medium-term recession as the bloc’s economy is already spinning. in slow motion.
“Markets are currently pricing in a policy rate that peaks at over 2%. We believe this would make monetary policy restrictive and we doubt the eurozone economy can withstand such tight conditions given the current challenges,” he said. explained Bill Papadakis, macroeconomic strategist at Lombard Odier.
The ten-year German Bund yield, a benchmark for the zone, ended up 8.5 points at 1.437% after hitting a peak since July 2014 at 1.47%. That of its French equivalent of the same maturity took around 12 points to 1.989%. In Italy, the ten-year rate exceeded the 3.5% mark for the first time since 2018, while in Greece this rate rose to 4.1%, the highest since 2020.
In the United States, where inflation is also a concern, the monthly consumer price figures will be published on Friday and should also provide a little more insight into the trajectory of the Reserve’s monetary tightening American federal government, which meets on June 14 and 15. In the meantime, the yield of ten-year Treasuries is stable at 3.0474%, but hit a session high since May 11 at 3.07%.
VALUES IN EUROPE
In Europe, all major Stoxx 600 sectors ended in the red. The negative trend was widened mainly by the real estate compartment (-3.1%) and that of new technologies (-1.7%) in a context of anticipation of rising rates.
Unibail-Rodamco, Klepierre or even Nexity fell from 1.9% to 4%, while in “techs”, SAP, STMicroelectronics, Dassault Systems or ASML fell from 1.3% to 2.8%.
In business news, EDF jumped 6.3% in response to information from Les Echos that nationalizing the group is among the priorities of the new government after the legislative elections in France.
Kering (-1.5%) ended in the red after presenting its medium-term ambitions to investors, with some analysts awaiting further details on the Gucci brand, which has suffered more than its competitors from health restrictions in China. The luxury sector was also penalized by the announcement on Thursday of new containment measures in certain districts of Shanghai.
Richemont and LVMH lost 3.1% and 2.3% respectively.
Beiersdorf, the maker of Nivea cream, gained 4.1% after the presentation of its medium-term objectives, while British American Tobacco fell 1.9%, the group having announced that it was still working to transfer its activities to Russia.
Credit Suisse, which issued a profit warning on Wednesday, plunged 5.6% on doubts over a rumored proposed acquisition of the Swiss bank by State Street.
AT WALL STREET
At the time of the close in Europe, the Dow Jones fell by 0.5%, the Standard & Poor’s 500 by 0.6% and the Nasdaq by 0.7%.
Nine of the S&P-500’s 11 major sectors are trading in the red, with rising bond yields weighing mainly on new technologies. Netflix yields 3.1%, Meta Platforms 2.1%, Apple 0.8% and Amazon 0.6%.
Tesla (+2.5%) is resisting the downward trend thanks to the rise in May of its sales of cars produced in China and the raising of UBS’s recommendation to “buy” on the stock.
CHANGES
At the close of trading in Europe, the euro fell 0.55% to 1.065 dollars after hitting a peak at 1.0773 before the announcement of the decisions of the European Central Bank. Some analysts explain this decline by the lack of details from the ECB on the risk of fragmentation of bond markets in the euro area.
The evolution of borrowing costs in the currency bloc has been marked in recent weeks by a marked divergence between those of Germany, considered the safest issuer in the region, and those of heavily indebted countries, such as the ‘Italy.
Christine Lagarde, the president of the ECB, said on Thursday that the ECB would deploy a new instrument if necessary to avoid such fragmentation The index measuring the fluctuations of the dollar against other major currencies is up 0.44%, heading for its second week in a row of gains and its best weekly performance in five weeks.
OIL
Oil prices remain near their three-month high despite the announcement of new health restrictions in parts of Shanghai. The larger-than-expected rise in Chinese exports in May, however, offers some support for the oil market.
Brent fell 0.20% to 123.32 dollars a barrel and US light crude (West Texas Intermediate, WTI) fell 0.43% to 121.48 dollars.
(Written by Claude Chendjou, edited by Sophie Louet)
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