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Market: Inflation revives risk aversion on equities


by Claude Chendjou

PARIS (Reuters) – European stock markets, with the exception of London, ended lower on Friday and Wall Street was also trading in the red amid risk aversion linked to inflation and fears of a recession after the release of monthly producer prices in Germany and statements by several US Federal Reserve (Fed) officials on the need for an interest rate hike.

In Paris, the CAC 40 ended with a loss of 0.94% to 6,495.83 points. The British Footsie, on the other hand, rose by 0.11%. The German Dax lost 1.12%.

The EuroStoxx 50 index fell by 1.25%, the FTSEurofirst 300 by 0.7% and the Stoxx 600 by 0.77%.

Over the week as a whole, the Parisian index fell by 0.88% and the pan-European Stoxx 600 fell by 0.80%.

Cautiousness dominated stock market trading in response to the release of producer price data in Germany in July, which posted record monthly (+5.3%) and annual (+37.2%) increases. ), suggesting the persistence of strong inflation while natural gas prices are moving at high levels (247 euros per megawatt hour).

In its monthly report, the German Finance Ministry said on Friday that the country’s economic outlook was now bleak.

In the United States, several Fed officials, such as James Bullard, Mary Daly and Esther George, rekindled fears of the economy plunging into recession by declaring themselves in favor of a sharp rise in rates in September, while the cost of credit has already increased by a total of 225 basis points since March.

“As market participants begin to return from vacation and look back…they will find that central banks are still far from achieving their inflation-control goals,” the notes wrote in a note. ING strategists.

“So that means the balance of power between central bank tightening expectations and recession fears will continue.”

In this context, the intervention next week of Jerome Powell, the chairman of the Fed, at the annual conference of central bankers in Jackson Hole, is particularly awaited.

VALUES IN EUROPE

On a sector level in Europe, the defensive compartments of healthcare (+0.79%) and food and beverages (+0.38%) resisted the downward trend, while the economically sensitive sectors economic sectors such as tourism (-3.03%) and automobile (-2.8%) were among the most significant declines.

Renault dropped 3.07% and Stellantis 2.94%, while Sodexo (-1.2855%) suffered from the lowering of Jefferies’ recommendation to “hold” on the stock.

Elsewhere in Europe, Just Eat Takeaway soared 25.75% after the announcement of the sale of its stake in iFood to Prosus (-1.32%).

AT WALL STREET

At the close in Europe, the Dow Jones was down 0.78%, the Standard & Poor’s 500 by 1.18% and the Nasdaq by 1.85%, in a context of profit taking and a lack of appetite for risk against a background of anticipation of rising rates.

The new technologies compartment, sensitive to the evolution of the cost of credit, fell by 1.58%, with in particular Amazon (-2.56%) and Alphabet (-1.98%).

On the corporate results side, Deere (-0.79%) was in the red after the world’s largest manufacturer of agricultural machinery lowered its annual profit forecast, while Foot Locker jumped 22.29% at the end of the year. thanks to better-than-expected quarterly results and the announcement of the appointment of former Ulta Beauty director Mary Dillon as group chief executive.

RATE

Bond yields in Europe were driven by the publication of producer prices in Germany, considered a leading indicator of inflation. That of the ten-year Bund, a benchmark for the euro zone, took more than 13 basis points, to 1.229%, the highest in a month, on fears of stagflation in Europe, according to Viraj Patel, macroeconomic strategist at Vanda Research.

The yield on ten-year US Treasuries for its part advanced 11 points to 2.992%, also to a one-month high, supported by the latest statements from Fed officials.

CHANGES

In foreign exchange, the dollar rose 0.56% against a basket of benchmark currencies, after hitting a five-week high in session, heading for its best weekly performance since April 2020. The euro, down by 0.44%, trades at 1.0044 dollars, the lowest for more than a month.

The pound, on course for its biggest weekly decline against the dollar since September 2020, failed to benefit from news of an unexpected rise in UK retail sales in July.

OIL

Oil prices are volatile after two consecutive sessions of increase: the barrel of Brent gained 0.98% to 97.54 dollars and that of American light crude (West Texas Intermediate, WTI) 1.36% to 91.73 dollars.

(Some data may show a slight shift)

(Written by Claude Chendjou, edited by Matthieu Protard)

Copyright © 2022 Thomson Reuters



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