Paris and other European markets continued to grow on Monday, the wave of cheap purchases taking precedence over fears of recession for the time being. Investors are wondering about the possible impact of the economic slowdown on the monetary policy of central banks, which could be less aggressive. The rise in stocks linked to raw materials is a support factor.
Mid-morning, the Bedroom 40 gained 0.48% to 6,102.45 points after a peak at 6,156.60 (+1.37%) in a business volume of 600 million euros.
What about earnings forecasts?
According to Morgan Stanley strategists, European stocks have not yet priced in the risk of recession despite low valuation levels. ” Equity markets tend to pull back two to three weeks before earnings forecasts start to be revised downwards, however, the latter have not yet started to slide into negative territory. “, they underline. They expect the lowering of earnings guidance to begin in the third quarter.
This last week of the first half should also be driven by portfolio readjustments by major institutional investors, which should support the markets. Marko Kolanovic, chief market strategist at JPMorgan, believes that these readjustments should generate a significant increase in stocks, especially as he considers that the market is oversold.
Inflation still on the menu for the week
Investors remain focused on macroeconomic indicators and signs of easing price pressures in the US as the inflation expectations component of the consumer confidence index stabilized against all expectations. Jerome Powell told Congress last week that a recession in the US economy remains a ” possibility ”, taking care to specify that the Federal Reserve is “ totally determined to fight inflation.
San Francisco Fed President Mary Daly indicated on Friday that she favored a 75 basis point hike in the Fed funds rate, while her counterpart at the St. Louis office, James Bullard, considered the fears of recession exaggerated.
Inflation will again be the center of attention this week with US household income and spending statistics on Thursday, including the PCE component of personal consumption expenditure, the Fed’s most closely watched measure of inflation. On the Old Continent, the figures for consumer prices in the euro zone will be unveiled on Friday.
But before that, the market will monitor, this afternoon, the evolution of durable goods orders in the United States in May, as well as the promises of home sales for the same month.
The automobile in the spotlight
Note, moreover, that Russia has defaulted on its foreign currency debt, a first since 1918, after the expiry on Sunday of the deadline linked to the payment of a reimbursement of 100 million dollars. This default is the consequence of Western sanctions which prevent Moscow from making its payments in euros or dollars.
The automotive sector is picking up after three weeks of decline in a row. Faurecia rose 6.1% as Jefferies raised its recommendation on the equipment manufacturer from “hold” to “buy”. Valeo follows with a gain of 4.8%, Michelin appreciated by 2.1% and Renault by 5.2%. Plastic Omnium takes 3.8%. The group has reached an agreement for the acquisition of Actia Power, the division dedicated to the electrification of vehicles of the French group Actia, on the basis of an enterprise value of 52.5 million euros.
Valneva rises 4.5%. The pharmaceutical group has indicated that it has received marketing authorization from the European Commission in Europe for its inactivated vaccine against Covid-19. This authorization covers the 27 countries of the EU, as well as Iceland, Lichtenstein and Norway.
Conversely, Ipsen fell 4.3% after announcing the acquisition of the American biopharmaceutical company Epizyme, specialized in oncology, for an initial amount estimated at 247 million dollars (234 million euros).