Like other global financial markets, the Paris Stock Exchange is moving to two-month lows as a series of monetary decisions approach this week, including that of the US Federal Reserve. Activity is particularly limited with barely 580 million euros traded on Cac 40 stocks due to the closure of the London Stock Exchange for the funeral of Queen Elizabeth II. Tokyo was also closed on Monday for Respect for the Elderly Day.
Mid-session, the Bedroom 40 fell 1.59% to 5,980.82 points after a floor at 5,979.69, its first passage below the 6,000 point threshold since July 15 (5,901.38). The contracts future on American indices yield between 0.8% and 1% after a fall of 4.8% of the S&P 500 last week, the strongest since mid-June.
Economists generally expect a 75 basis point rate hike from the Federal Reserve on Wednesday night, which would take the Fed funds rate within a range of 3% to 3.25%, from 2.25% to 2.5% currently. The prospect of a third tightening in the cost of credit of such magnitude was reinforced by the less marked than expected slowdown in consumer price inflation in the United States in August, especially since in core data (excluding food and energy), inflation is showing no signs of easing.
Last week’s US economic indicators suggest that the slowdown in activity growth has not yet exerted downward pressure on core inflation, which should keep the Fed in the mood ‘hawkish’ during his meeting of this week, observes Andrew Hunter of Capital Economics.
The credibility of the Fed in question
A tightening of one percentage point is not excluded. According to CME Group calculations based on Fed funds futures contracts, this probability is estimated at 20%. Such a tightening is therefore not the preferred scenario insofar as it would have the effect of undermining the Fed’s credibility and reinforcing fears of a hard landing for the American economy.
On the bond market, the yield on the 2-year US bond, sensitive to expectations of changes in short rates, rose by 30 basis points last week to reach 3.92%, its highest level since 2007, before returning to around 3.86%. That of the 10-year German Bund, which serves as a benchmark in the euro zone, tightened by nearly 4 basis points to 1.7860%, in view of a three-month high.
TF1 and M6 throw in the towel
Lagging behind the Fed in its monetary tightening cycle, the Bank of England could opt for a rate hike of 50 to 75 basis points on Thursday and, for many economists, the United Kingdom is already in recession. The Bank of Japan, which will give its verdict on Friday, is an exception in that it has given no sign of its willingness to abandon its ultra-accommodative policy despite the fall of the yen.
On the value side, TF1 loses 4.3%, its parent company Bouygues 2.3% and M6 4.1%. The two television groups have announced that they are abandoning their merger project, initiated in May 2021 in order to resist the rise of online television platforms, such as Netflix or Disney+. The concessions required by the Autorité de la concurrence are such that the project ” no longer presented any industrial logic Bouygues said in a statement.
Valneva 12.2% drop. The French group and the German IDT Biologika have reached an agreement on the end of their collaboration in the production of the inactivated virus vaccine against Covid-19 from Valneva. Given the reduction in the volume of orders from the European Commission, Valneva has suspended production of the vaccine and will, in compensation, pay IDT Biologika up to 36.2 million euros in cash and the equivalent of 4, 5 million euros in kind, that is to say in equipment.
TotalEnergies drop of 2.1% in the wake of the 1.8% drop in the barrel of Brent crude from the North Sea. The lifting of containment measures in Chengdu, China, on Monday is not enough to hide fears about the global economy.