(CercleFinance.com) – The Paris Stock Exchange should catch its breath on Friday morning, at the end of a week of great volatility triggered by the confirmation of the tightening of the policies of the major central banks.
Around 8:15 a.m., the ‘future’ contract on the CAC 40 index – delivery at the end of May – fell two points to 6314 points, announcing a start to the session with no real direction.
After spending much of yesterday’s day in positive territory, gaining up to 2.5%, the Paris market had swung into the red around 5:00 p.m., to finally end the session with a loss of 0. .4% to 6368 points.
Investors gave a somewhat unbridled welcome to Jerome Powell’s assertion that the Fed would not go beyond half-point rate hikes, regardless of the inflationary backdrop.
After its ‘rally’ on Wednesday, Wall Street fell heavily on Thursday, weakened by a new outbreak of fever in the bond market. The Dow Jones lost 3.1% and the Nasdaq Composite plunged 5%.
Beyond the Fed’s decisions, the Bank of England also formalized yesterday an increase in its main key rate, from 0.75% to 1%, aimed at coping with galloping inflation in the country.
The evolution of inflation and the amplitude of rate hikes should continue to be the main point of attention for investors in the weeks to come.
“These two variables remain key in determining monetary policy and will continue to dictate the trend for equity markets,” warns Gilles Guibout, head of European equities at AXA IM.
‘Volatility should remain high in this period of tension and low visibility,’ he said.
The VIX index, which measures the implied volatility of the S&P 500, also shot up yesterday to finally go back above the 30-point threshold.
Over the week, the CAC 40 has so far fallen by around 2.5%.
On the bond market, government bond yields, whose sudden movements have often been behind the correction in equities in recent weeks, remain near their peaks.
The 10-year-old American rose rapidly yesterday and is camping above the psychological cap of 3% this morning. Its German equivalent, also the author of a spectacular counterpoint yesterday, stands at 1.04%.
Caution should again limit the taking of strong positions this Friday, a few hours before the publication of monthly employment figures in the United States.
The monthly report from the US Department of Labor is expected at 2:30 p.m. (Paris time) and economists expect 400,000 job creations in April, with an unemployment rate that should fall further, from 3.6% to 3.5%.
With the US economy now close to full employment, wage pressures remain strong and could even intensify if vacancies are not filled.
Better than expected figures could lead the Fed to consider that the labor market is ‘overheated’ and that it should be curbed by new monetary tightening initiatives.
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