In decline at the opening after the 75 basis point rise in Fed rates on Wednesday evening, the strongest since 1994, the Paris Stock Exchange accentuated the movement to completely erase its progress the day before. The surprise 50 basis point hike in the Swiss National Bank’s main policy rate amplified fears about soaring prices. While the Bank of England has for its part raised its repo rate by 25 basis points to 1.25% as expected, it is no less than its fifth consecutive tightening since December, especially since it has warned that it could be brought to act more firmly if necessary.
Around 2:45 p.m., the Bedroom 40 lost 2.09% to 5,904.20 points in a business volume of nearly 1.5 billion euros. The contracts future on American indices relapsed from 1.4% to 2%, after the 1.5% rises in the S&P500 and 2.5% of Nasdaq Composite Wednesday.
No relief before July meeting
The relief that allowed a rebound on Wall Street last night fizzled as the US Federal Reserve’s fight against inflation raised fears of a recession and, therefore, a deterioration in corporate performance. After cutting the Fed funds rate to a range of 1.5% to 1.75%, the central bank estimates that it should stand at 3.4% at the end of the year, down from 1.9% estimated in March, and at 3.8% in 2023, according to the famous “dot plot”, a dot chart illustrating the expectations of the members of the monetary policy committee.
Strategists at NatWest Markets say they are fairly certain that it ” there will be no relief ahead of the July monetary policy committee meeting which should lead to a further substantial increase in Fed rates. The Department of Labor announced last Friday an acceleration in the rise in consumer prices to 8.6% over one year, a level not seen since December 1981, especially since the five-year inflation expectations identified by the survey from the University of Michigan came out at their highest since June 2008.
On the bond market, the yield on the 2-year US bond, which reflects inflation expectations, tightened by 8 basis points to 3.27%, and that of the 7-year maturity by 16 basis at 3.41%.
Engie weighed down by the drop in gas deliveries
Engie loose 8.5%. The energy company said it had seen a drop in gas deliveries after the new restrictions on exports decided by Moscow, adding however that the group’s customers were not affected by the situation.
Cyclical and technological stocks show the strongest declines, such as Saint Gobain (-5.9%), ArcelorMittal (-4.5%) and STMicroelectronics (-3.5%).
The distribution sector is weighed down by the warning issued by the British asos on its annual accounts. The action plunged 29% in London. The associated Stoxx 600 shows the largest sectoral decline (-3.7%).
Ipsen loses 3%. Morgan Stanley lowered its price target on the title of the pharmaceutical group from 90 to 80 euros, maintaining its opinion of “underperformance”.
Conversely, Euronext increased by 2.8%. JPMorgan raised its recommendation on the stock market platform from “neutral” to “outperformance” to target 101 euros.