This is his first meeting of the year. On Tuesday 25 and Wednesday 26 January, the monetary policy committee of the American Federal Reserve (Fed) will look into the question of inflation and the normalization of its monetary policy. And this, in order to assess whether the economy is strong enough to support a rise in the cost of money, which is now close to zero. A rise – it would be the first since 2018 – is expected for the month of March, but its magnitude, 25 basis points or 50 basis points, is an element of uncertainty. Beyond that, the market wonders about the possibility that the Fed will increase its key rates by a total of four times this year.
Four Fed Funds hikes this year?
This is the case of economists at Goldman Sachs, who are also betting on a reduction in the size of the balance sheet of the monetary institution in July. “We see a risk that the FOMC decides to tighten its policy at each meeting until the perception changes, they write in a note to their customers. This reinforces the possibility of a rate hike at every meeting or an earlier-than-expected balance sheet announcement in May. “. On the markets, the probability of seeing the Fed act in March is estimated at more than 84%.
Faced with uncertainty, operators therefore played it safe. Especially since the tensions between Ukraine and Russia are exacerbated day after day. This weekend, Washington ordered the families of American diplomats stationed in Kiev, the capital of Ukraine, to leave the country and advised against its nationals traveling to Russia. London and Canberra followed suit. ” We believe a Russian invasion could happen at any moment a senior US official told reporters.
At the close, the Bedroom 40, weighed down by cyclical and tech stocks, fell 3.97%, the steepest since November 26, when the Omicron variant appeared in South Africa. Along the way, he broke three thresholds, 7,000 points, 6,900 points and 6,800 points, to finish at 6,787.79 points, his lowest level since the beginning of December. As so often, this fall occurred in a large volume of transactions of 6.2 billion euros. Elsewhere in Europe, the Dax dropped 3.88%, the FTSE Eb 4.02% and the Footsie 2.63%. across the Atlantic, the Dow Jones gives up 2% and the Nasdaq Composite 3%. Once again, tech stocks are caught in the turmoil. For Michael Wilson, strategist at Morgan Stanley, they have been overvalued during the pandemic and the recent sell off is “ logic, not because the Fed is changing direction, but because this type of valuation makes no sense whatever the investment environment. »
At the macroeconomic level, the easing of tensions in supply chains enabled the manufacturing sector to rebound in January in the eurozone, but the surge in contaminations with the Omicron variant slowed down that of services. The composite index (synthesis between industry and services) established by IHS Markit fell by 0.9 points to 52.4 points in the first estimate, its lowest level since last February.
Orpéa in turmoil
On the value side, the luxury compartment, heavily weighted in Paris, suffered profit taking. LVMH, Kering and Hermes lost between 2.98% and 4.93%. Cyclical stocks, those of tech and those linked to raw materials also ended in sharp decline, like the steelmaker ArcelorMittal (-6.43%) or Worldline (-7.28%).
This decline pales in comparison to the tumble ofOrpea. The title of the manager of retirement homes fell by 16.1%, before being suspended from trading, while a book entitled “The gravediggers: revelations about the system that mistreats our elders” is due to appear in two days. Orpéa should soon publish a press release. In its wake, Korian dropped 14.04%.
Soon a woman at the head of Orange?
Sole survivor of the Cac 40, Orange gained 0.9%. The telecom operator is in the process of appointing Christel Heydemann to the post of general manager as part of an overhaul of its governance, reports the Reuters news agency, citing sources familiar with the matter. The board is expected to vote on Friday.
Finally, Bernstein downgraded his opinion on EDF (-1.60%), going from “outperformance” to “in line performance”, with a target price reduced from 14.50 to 8.50 euros. For its part, Exane BNP Paribas raised its recommendation on Renault (-2.81%) from “neutral” to “outperformance”. The broker believes that the upside potential induced by the increase in its prices and cost reductions should offset the shortages of raw materials, already priced in. In addition, the alliance formed with Nissan and Mitsubishi is expected to announce on Thursday a plan to invest 20 billion euros in electric vehicles, Reuters said, citing two people familiar with the project.