The Cac 40 remains very agitated. Visibility is low, with, on the one hand, rate hikes to bring down inflation and, on the other, the risk of recession. The euro/dollar is approaching parity
It’s the world upside down ! On Friday, the announcement of still solid job creations in the United States did not please the markets. Normally, full employment rhymes with consumption and therefore with economic growth, the creation of 372,000 jobs in June (against 265,000 anticipated) should have been welcomed by investors.
Explanations: these last days, it is the word recession which was on everyone’s lips and, with the publication of results for the quarter at the end of June approaching, it was to be feared that companies would revise their profit forecasts downwards for the second half. At the same time, some recent economic data could suggest that the peak of the rise in prices had been reached. Under these conditions, the US Federal Reserve could have eased off a bit. The Fed has already raised the federal funds rate three times, one on March 16 (25 bps), one on May 4 (50 bps) and one on June 15 (75 bps). Before this publication of employment figures, economists were counting on a possible increase of only 50 points. But with such high job creations, can the Fed reduce the extent of its monetary tightening? It’s not so sure anymore, and a 75 basis point increase in July is now very likely… which could lead to a recession.
The other major event of the week took place on the foreign exchange market: the euro, which has continued to weaken against the dollar, is approaching parity. This is bad news for our trade balance, since we import oil in dollars. The good news of the week is the ebb of crude oil. Recession fears, the end of the strike in the oil sector in Norway and the still strong pandemic in China caused the price of Brent to return to below $100 on Thursday. However, it rose to $106 on Friday.
SYLVIE AUBERT