The Paris Stock Exchange is stabilizing in the wake of Wall Street’s attempted rebound at the opening, in a still bearish market made erratic by volatility accentuated by low trading volumes with barely 1.2 billion euros traded on the values of the Cac 40. The trend is also weakened by the feeling that the central banks will maintain a firm policy in terms of interest rate increases as long as inflation does not give credible signs of calm.
Investors fear that this attitude will lead to a sharp weakening of the economy and corporate margins as the third quarter results approach, in Europe and the United States. The condition of ” bear market will last until the prospect of a deterioration in fundamentals is more widely priced in “, warn the strategists of Morgan Stanley.
Around 4 p.m., the Bedroom 40 is almost stable at 5,859.34 points (-0.13%). In New York, the Dow Jones gains 0.47% and the Nasdaq Composite yields 0.34% on this Christopher Columbus Day, a public holiday in the United States. The US bond market is closed. AMD down 2.5% and Nvidia 1.7% after Washington’s announcement of tighter controls on semiconductor exports to China, including for foreign manufacturers using US equipment. In Paris, STMicroelectronics down 1.2%.
The Fed and inflation in the crosshairs
Hopes of the Fed shifting towards a reduction in the scale of its rate hikes were thwarted by the less marked than expected slowdown in job creations in the United States in September, especially as the rate unemployment fell by 0.2 points to 3.5%. Investors had hoped at the beginning of last week that the contraction in manufacturing activity and the sharp drop in job offers in the United States would encourage the Fed to ease off. But several Fed officials have indicated that their main concern remains controlling inflation.
In the euro zone, the Dutch Klaas Knot, governor of the ECB, said this morning that the European Central Bank will have to make at least two “significant” rate hikes in its next meetings, after the hike of 75 basis points. announced last month. He also said that the ECB must complete the process of normalizing its interest rates before starting discussions on a quantitative tightening program. At the same time, the sentiment of investors in the euro zone fell in October to its lowest level since May 2020, the index published by the Sentix institute having fallen by 7.5 points to -31.3.
The Bank of England (BoE) announced this morning the doubling of the maximum amount of its daily purchases of long-term bonds in order to ensure an “orderly” end to the emergency program, of a total amount of 65 billion pounds, expected on October 14. Despite this decision, the yield on the 30-year gilt settled above 4.5% while the pound sterling moved to a low of almost two weeks. ” The Bank of England will calm the market, but not save it “Summarizes Geofrrey Yu, strategist at BNY Mellon.
US banks to watch
The US central bank will release the “minutes” of the September FOMC meeting on Wednesday, a day ahead of the consumer price statistic, which is expected to reflect a slight deceleration to 8.1% year on year in September, after 8, 3% in August, however, in “core” data (excluding food and energy), the rise should on the contrary mark an acceleration to 6.5% over one year, against 6.3% in August. The weekend will also be animated by the publication on Friday of the quarterly reports of the major American banks, which traditionally opens the earnings season in the United States.
For the time being, the market assesses the probability of a 75 point increase in its key rates at the beginning of November at nearly 82%, according to calculations by CME Group on the basis of the evolution of contracts. future on Fed funds. A rise of this magnitude would be the fourth in a row.
Talks between Renault and Nissan
Renault rose 4.2%, supported by the prospect of a reduction in its stake in the capital of Japanese Nissan in the context of discussions between the two groups to strengthen their alliance. Nissan could also raise funds for this purpose, according to sources quoted by Reuters.
Defense stocks are sought after as multiple explosions were heard in central Kyiv and other cities across Ukraine this morning in response to the attack that damaged the bridge linking Crimea with Russia at the weekend and that Vladimir blames on Ukraine. Thales takes 0.9% and Dassault Aviation 1.7%.
Luxury stocks continue to decline. Kering, Hermes and LVMH losing around 1%. The sector is particularly affected by the sharp rebound in Covid-19 infections in China during the holidays last week.
Casino (-1.8%) hit a new historic low after Standard & Poor’s downgraded its credit rating from B+ to B-. The rating agency has also revised down its profitability estimates for the distribution group.
Finally, vinci gains 2.6%. Jefferies has started monitoring the construction group and “purchase” concessions to target 105 euros.