First reassured by Jerome Powell’s commitment to control inflation, the Paris Stock Exchange was not shaken by the record level, but in line with expectations, of consumer prices in the United States. These increased by 0.5% over one month and 7% over one year in December, unheard of since June 1982, against respectively + 0.4% and + 7% anticipated by the market. Excluding volatile items such as food and energy, the increase is 0.6% over one month and 5.5% compared to December 2020 (+ 0.5% and + 5.4% expected).
In aggregate data, as in underlying, the monthly figures are slightly higher than expected, but the difference is marginal, therefore manageable as the Fed has prepared the markets well to anticipate a sharp increase in prices. It seems investors were expecting much worse numbers. Some economists believe that inflation could reach its peak during the first quarter, even if January promises to be still difficult due to numerous shortages, especially in food products, and absenteeism linked to contamination with the Omicron variant of Covid-19.
Around 4 p.m., the Cac 40 rose 0.82% to 7,242.18 points in a business volume of 2 billion euros. In New York, the Dow jones gains 0.49% and the Nasdaq Composite 0.64%, aligning for the time being its third increase in a row.
Prevent inflation from setting in
During his confirmation hearing before a Senate committee, the Chairman of the Federal Reserve said on Wednesday that the US economy is strong, but monetary tightening is needed to contain inflation and prevent it from falling. installs without hampering growth. The Fed will engage in a policy ” closer to normal, but it’s a long road to normal considering where we are at (…) and this policy should not have a negative effect on employment “, did he declare.
This normalization should involve rate hikes, reduction of the Fed’s asset purchase program and its balance sheet. However, the intervention of Jerome Powell did not include any major modification compared to what had already been announced. He also gave no indication of the timing or number of rate hikes to be expected, nor a timing for the reduction in the size of the central bank’s balance sheet. For Paul Ashworth, US chief economist at Capital Economics, the first rate hike ” should take place during the FOMC in March, whereas previously we anticipated it in June “.
The punch bowl neither too full nor too empty
The president of the Fed ” delivered a performance worthy of Goldilocks Et Les Trois Ours Wrote Jeffrey Halley, senior market analyst at Oanda, in a note this morning. ” Jerome Powell has indicated that the Fed may raise rates to contain inflation, which it plans to quickly begin the process of reducing its balance sheet, but he also announced that inflationary pressures are expected to peak in the middle of year », He sums up.
Some investors believe that the US and European markets will be able to bear a higher cost of credit provided economic growth supports corporate results and inflation peaks. ” If bond yields tighten and earnings decline, equities should suffer this year, says Luca Paolini, chief strategist at Pictet Asset Management. But the fourth quarter earnings season could also be a catalyst for the next rebound », He nuances.
The yield on the US 10-year bond eased somewhat to 1.7280% after hitting 1.8% earlier in the week, while the German Bund of the same maturity fell back to -0.0660% after touching – 0.01% Tuesday. He was then on the verge of returning to positive territory for the first time since May 2019.
The Fed will publish, at 8 pm, its Beige Book, a document which takes stock of the evolution of the economy over the past six weeks. It will also serve as a working document for the Monetary Policy Committee meeting on January 25-26.
End of the year with a bang for Rexel
Largest increase in SRD, Rexel advance by 8.1% and set a new record. Bolstered by stronger-than-expected sales activity in the fourth quarter and its efforts to control costs, the electrical equipment distributor indicates that it has exceeded its objectives for the year 2021. Daily sales growth should have reached 15, 3% last year, versus a forecast of between 12% and 15%, and the Adjusted EBITDA margin is expected to stand at 6.2%, versus a forecast of 5.7%.
OVHcloud increased by 4.2%. The specialist in cloud computing services has confirmed its objectives for its financial year as at August 31, 2022, after recording a 13.9% increase to 187.2 million euros in its turnover in the first quarter.
ArcelorMittal climbed 7.2% in the wake of iron ore prices as torrential rains in Brazil interrupted production at the country’s mines, including those of world number two Vale. For his part, Eramet appreciates 7.5%, driven by the rise in nickel prices.
TotalEnergies rose 2.8% as a barrel of Brent from the North Sea hit $ 84.35, its highest level since the emergence of the Omicron variant of the coronavirus, last November. Oil prices continue to benefit from the anticipation of increased demand.
Conversely, Renault loses 2.9%. The automaker risks collective action from owners of Renault, Nissan, Dacia and Mercedes vehicles equipped with the 1.2 TCe petrol engine and victims of breakdowns, reports AFP, citing their lawyer.
Finally, Nexity loose 4.1%. Oddo BHF downgraded the property developer from “outperformance” to “neutral” in anticipation of a probable slowdown in the group’s growth this year and an increase in debt.