The Paris Stock Exchange is trading at two-month lows and Wall Street is set to retreat at the opening on the eve of a two-day meeting of the Fed’s monetary policy committee. In addition to another interest rate hike, investors fear a lowering of corporate forecasts ahead of the third-quarter earnings season after FedEx withdrew its annual guidance.
Activity is particularly limited with barely 850 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.
Around 2:30 p.m., the Bedroom 40 fell 1.02% to 6,015.24 points after a floor at 5,974.72, its first passage below the 6,000 point threshold since July 15 (5,901.38). The contracts future on American indices yield around 0.8% after a fall of 4.8% of the S&P 500 last week, the strongest since mid-June.
The economic slowdown has no effect on inflation
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.
In the euro zone, slowdown [de l’économie] alone will not lower inflation said the vice-president of the European Central Bank, Luis de Guindos, during a press conference in Mardrid on Monday. Suggesting further rate hikes will be needed, he also said the extent will depend on statistics, adding that the ECB’s board has yet to discuss how and when it might reduce its balance sheet. For its part, the Bundesbank indicated in its monthly report that the signs pointing to a recession in Germany are becoming more and more evident.
TF1 and M6 throw in the towel
Lagging behind the Fed in its monetary tightening cycle, the Bank of England could opt for a 50-75 basis point rate hike on Thursday and, for many economists, the UK 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 2.2%, its parent company Bouygues 1.2% and M6 2%. 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 12.5% 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 fall of 2% in the wake of the decline of 2.6% of the barrel of Brent from the North Sea to 89.05 dollars. The lifting of containment measures in Chengdu, China, on Monday is not enough to hide fears about the global economy.