The Paris Stock Exchange fails to extend its rebound of the last two sessions, while Wall Street is hesitant after its good performance last week. Activity in the services sector in the United States is approaching the contraction zone with an ISM index down 1.6 points to 50.3 in May, against an expected acceleration to 52.4. The trend is also affected by Christine Lagarde’s comments on inflation. Moreover, if the solidity of the labor market in the United States dismisses for the moment the specter of a recession, the high number of job creations places the Federal Reserve in a delicate position. Oil stocks are surrounded after Saudi Arabia’s decision to cut production, while the luxury sector suffers profit taking.
Around 4:30 p.m., the Bedroom 40 fell 1% to 7,197.73 points in a business volume of 1.2 billion euros. In New York, the Dow Jones lost 0.19%, while the Nasdaq Composite takes 0.1%.
High pressures on underlying inflation
Pressures on underlying inflation remain high in the euro zone and there is no clear evidence That a peak has been reached in this area, Christine Lagarde, President of the European Central Bank, told the European Parliament’s Economic and Monetary Affairs Committee on Monday. Boris Vujcic, a member of the Governing Council, told Bloomberg this morning that inflation in the euro zone is only gradually declining and that the risk of a reacceleration in price increases is greater than that of a decline more fast. For him, ” disinflation is expected to be gradual, with risks still on the upside given tight labor markets and underlying pricing pressures in the services sector “.
In the United States, the labor market remains solid with the creation of 339,000 jobs in May, while wage growth slowed slightly to 4.3% over one year and the unemployment rate increased by 0.3 points. to 3.7% of the working population. These figures support the feeling that the Federal Reserve could opt for a pause in its cycle of raising interest rates, before a probable tightening in July. The market is pricing an 84% chance that the Fed funds rate will stay within a 5%-5.25% range on June 14, according to CME Group’s FedWatch tool.
Inflation in the sights of the Fed
” Consumer price figures, which will be released the day before the Fed’s monetary decision, could well be the main factor likely to tip expectations towards a tightening if inflation is highobserves Jim Reid, of Deutsche Bank. However, that seems unlikely before the CPI is released, as nothing will be 100% decided by then. So we’re back to some uncertainty about the Fed’s near-term outlook. “, he specifies.
Michael Hewson of CMC Markets agrees, saying he ” would be easier to raise rates in June and keep options open for July. Communication would undoubtedly be easier, however, the differences within the FOMC already show that different opinions are beginning to emerge for the future. “. The Fed entered a blackout period, preventing its members from speaking publicly until the announcement of its monetary decision.
TotalEnergies down, new record for Apple
The barrel of Brent from the North Sea rose 2.2% to 77.83 dollars after gaining nearly 4% this morning. Saudi Arabia plans to unilaterally limit production by around 1 million barrels a day starting in July, which would be its biggest cut in several years. For its part, OPEC+ has decided to continue to limit the supply of the enlarged cartel until 2024. TotalEnergies (-0.2%) erased its morning gains, however. LVMH, Kering And Hermes fall between 1% and 2% after their rebound on Friday. Defensive sectors such as telecoms are progressing. Orange rises by 2.1%.
At New York, Apple ahead 1.4% after hitting a new high of $183.99. The group is expected to present its AR / VR mixed reality headset on Monday at the World Developers Conference. Bank of America And Citigroup yield approximately 1% following an article of the wall street journal according to which the regulatory authorities are preparing a tightening of the capital rules of the big American banks, which could be increased by 20%.
The scale of Wall Street’s rise in question
Investors are wondering about the future of the rise seen on Wall Street this year, which is largely driven by a handful of tech heavyweights. ” The question is whether the magnitude of this rise can widen, which could give further impetus to what appears to be a very narrow rally. “, comments Yung-Yu Ma, chief strategist at BMO quoted by CNBC.
European stocks could fall 10% this summer, according to Graham Secker, strategist at Morgan Stanley. According to him, the MSCI Europe index should suffer from the slowdown in market growth before rebounding towards the end of the year. ” Year-to-date resilience in equities is likely to be gradually challenged over the next three months by disappointing economic momentum and further tightening in financing conditions, writes Secker, who sees cracks emerging “.