the Bedroom 40 ends down 0.77%, at 6,418.89 points, after gaining just over 0.6% in session. The flagship index of the Paris Stock Exchange suddenly took a nose dive shortly before 4 p.m. on information from the Reuters agency which, citing four sources, said that OPEC +, during the technical meeting held today, ahead of that of the major decision-makers scheduled for tomorrow, had not discussed the idea of excluding Russia from the production agreements. On that report, oil prices pared their losses, with Brent rising to $118 a barrel from $116 this morning. Yesterday, crude oil prices were at their highest for two and a half months (at more than 122 dollars for Brent), after the European Union decided on an embargo on Russian oil. Meanwhile, the wall street journalciting cartel delegates, reported that some OPEC members were considering suspending Russia from the deal as Western sanctions hurt the country’s ability to produce more.
On Wall Street, the Dow Jones and the S&P500 give up just over 0.7%.
The ECB under pressure to act quickly and strongly
Poor macroeconomic indicators in the euro zone fueled fears about growth in an environment already weakened by a record inflation rate of 8.1% over one year in the region. In Germany, where consumer price inflation hit 8.7% year on year, retail sales contracted 5.4% in April, their biggest drop in a year. More broadly, growth in manufacturing activity slowed last month in the eurozone, with the PMI index published by S&P Global hitting an 18-month low of 54.6 points, from 55.5 in April.
For Chris Williamson, Chief Economist at S&P Global“the growing uncertainty surrounding the economic outlook and linked to Russia’s invasion of Ukraine as well as continued high inflationary and supply pressures is resulting in greater risk aversion and a reduction in consumer spending, thus increasing the downside risks for the manufacturing sector in the euro zone”.
Economists fear that soaring prices will force central banks to be more aggressive. Robert Holzmann, the governor of the Austrian central bank and member of the governing council of the ECB, notably declared that “lack of decisive action” inflation expectations risk becoming unanchored. And to add that a “rise of 50 basis points [en juillet] would send the necessary clear signal that the ECB is serious about fighting inflation. Economists at Deutsche Bank for their part anticipate a 50 basis point rise in ECB rates by September, becoming the first bank to have this anticipation.
The Fed tackles the reduction of its balance sheet
In the United States, the Federal Reserve begins this Wednesday the process of reducing the size of its balance sheet by nearly 9,000 billion dollars (the central bank will not reinvest the amount of bonds that have reached maturity). It will initially decrease by 47.5 billion per month before doubling this amount to 95 billion dollars from September. Traders are also expecting a 50 basis point hike in the Fed Funds rate during the next two meetings of the monetary policy committee.
Opinions remain divided within the institution, Governor Christopher Waller having come out in favor of a continuation of monetary tightening by half a point in order to ensure that inflation is under control, while d Other officials, including Atlanta Fed President Raphael Bostic, believe a break could come in September. The Fed is to publish its Beige Book in the evening, which takes stock of the evolution of the economy in the 12 districts of the central bank. The Bank of Canada, for its part, raised its main key rate by 50 basis points to 1.5% on Wednesday.