Powell reassures, but the stock market fears a new surge in US inflation


The Paris Stock Exchange is progressing, supported by the commitment of the President of the American Federal Reserve to control inflation without weakening the economy. If the market is relieved by the less “hawkish” than feared tone adopted by Jerome Powell, investors are nevertheless worried about a possible slippage in consumer prices in December in the United States. Expected this afternoon, the statistics will be decisive for the rest.

At 12:10 p.m., the Bedroom 40 gains 0.57% to 7,223.98 points in a business volume of 1 billion euros. The contracts future March on US indices are moving between equilibrium and a gain of 0.3% after the S&P 500 ended a series of five straight declines on Tuesday evening, while the Nasdaq Composite took more than 1%.

Prevent inflation from setting in

During his confirmation hearing before a US Senate committee, Jerome Powell indicated that the US economy is solid, but that monetary tightening is necessary to contain inflation and prevent it from taking hold. The Fed will engage in a policy closer to normal, but the road to normal is a long one considering where we are (…) and this policy should not have a negative effect on employment “, did he declare.

This normalization should go through rate hikes, the reduction of the Fed’s asset purchase program and its balance sheet. However, Jerome Powell’s intervention did not involve 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, or the timing for the reduction in the size of the central bank’s balance sheet. For Paul Ashworth, chief US economist at Capital Economics, the first rate hike “ should occur at the March FOMC, whereas previously we anticipated it in June “.

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 rise 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 Fed waited too long

The highlight of the day is expected at 2:30 p.m. with December consumer prices in the United States. The consensus formed by Bloomberg expects an increase of 0.4% over one month and 7% over one year, which would be a new high of almost 40 years after 6.8% in November.

Investors believe that inflation should have peaked with the current month’s release and that the trend will reverse before the spring. But, the truth is, no one really knows where we’re headed, all we know is that the Fed waited too long to act, and if today’s inflation numbers are higher than expected, the recent rise in stocks will melt like snow in the sun warns Ipek Ozkardeskaya, senior analyst at Swissquote.

The Fed will publish, at 8 p.m., its Beige Book, a document that takes stock of the evolution of the economy over the past six weeks.

End of the year with a bang for Rexel, Nexity downgraded

Biggest rise in SRD, Rexel advance of 7%. On the back of more sustained commercial activity than expected in the fourth quarter and its efforts to control costs, the distributor of electrical equipment indicates that it has exceeded its objectives for the year 2021. Growth in day-to-day sales should have reached 15, 3% last year, against a forecast of between 12% and 15%, and the adjusted Ebita margin should be 6.2%, against a forecast of 5.7%.

OVHcloud increased by 3.9%. The specialist in dematerialized IT services (cloud) confirmed its objectives for its fiscal year to August 31, 2022, after having recorded a 13.9% increase in its turnover in the first quarter to 187.2 million euros.

ArcelorMittal gained 3.7% 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 rose by 4.8%, driven by the rise in nickel prices.

TotalEnergies rose 2.5% as the barrel of Brent from the North Sea touched 84.35 dollars, its highest level since the emergence of the Omicron variant of the coronavirus last November. Oil prices continue to benefit from the expectation of an increase in demand.

Conversely, Renault loses 2.2%. The automaker risks class action by owners of Renault, Nissan, Dacia and Mercedes vehicles that were victims of breakdowns, AFP reports, citing their lawyer.

Finally, Nexity loose 4.1%. Oddo BHF downgraded the title of the real estate developer from “outperformance” to “neutral” in anticipation of a probable slowdown in the group’s growth this year and an increase in debt.




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