The dropout was brutal. When the US inflation figure for June was published at 2:30 p.m., a wave of panic blew on the stock market: from 6,000 points, the Bedroom 40 fell to 5,922.94 points. The Parisian index slowly recovered its head, but it nevertheless remained in the red at the close, yielding 0.73%, to 6,000.24 points, in a still low trading volume of 2.9 billion. euros. Across the Atlantic, futures tipped into negative territory after the Bureau of Labor Statistics (BLS) report, the Dow Jones suddenly unscrewing 200 points. At the end of the European session, the index is down 0.8%, while the Nasdaq Composite loses 0.3% and the S&P500 0.6%.
“An incredible 9.1%”
In the BLS document, attention was focused on one piece of data in particular: the 1.3% increase over one month in the consumer price index, after a 1% increase in May and a consensus set at 1.1%. This figure suggests that the peak of inflation may not have been reached and that the rise in prices is widespread. ” In June, the headline CPI rose faster than expected: an incredible 9.1% year on year, reaching a four-decade high, tweeted Steven Rattner, former adviser to Barack Obama. Gasoline, housing and food were the main contributors. The Fed has work to do and must continue to raise » its rates. A sign that tensions are everywhere, housing prices increased by 0.6% over one month in June, as in May. While the price of overnight stays in hotels fell by 2.8%, rents rose by 0.8%, the largest monthly increase recorded since 1986.
In June, headline CPI grew faster than expectations — an incredible 9.1% yr/yr, notching our latest 4-decade high. Gas, shelter, and food were the major contributors. Fed has its work cut out for it and must keep hiking. pic.twitter.com/ik7oqCSNNo
—Steven Rattner (@SteveRattner) July 13, 2022
The euro tickles parity with the dollar
Over one year, core inflation, excluding energy and food, came out at 5.9% in June, against 6% in May and 5.7% expected by the consensus. We are in the ” nails for another 75 basis point hike in key rates [de la Réserve fédérale américaine] at the July meeting, but with commodity prices having fallen sharply since and wage growth having slowed in recent months, the outlook for inflation does not look as gloomy as it did a month ago, says Michael Pearce, senior US economist at Capital Economics. Therefore, speculation of a 100 basis point hike this month seems exaggerated.
While equity markets took a hit, the already weakened euro fell briefly below parity with the dollar for the first time since December 2002, before returning to 1.008. The single currency is suffering from the rise in US interest rates.
This weakness is also a sign that fears of recession on the Old Continent are particularly strong, reinforced by the energy crisis resulting from the conflict in Ukraine. ” The ECB is in a very, very difficult position. It could be said that it was slow to end its bond purchases, but also to consider a tightening of monetary policy commented Jeremy Stretch, head of G-10 FX strategy at CIBC Capital Market on CNBC. In the United States, there are also fears of recession. The Fed’s favorite indicator to measure it, the spread between the rate of three-month spot debt securities and their eighteen-month forward (near-term forward spread) fell back below 100 basis points, to 90 at the end of the session, against 270 points in April.
Also faced with inflation, the Bank of Canada took the bull by the horns, raising, to the surprise of the market, its key rate by 100 basis points, the largest increase since August 1998. Now, it is stands at 2.5% and the institution believes that its monetary tightening should accelerate further. ” Excess demand continued to grow in Canada. Labor markets are tight: the unemployment rate is at historic lows, labor shortages are widespread and wage pressures are intensifying “, she explains.
EDF suspended from listing
On the values side, BNP Paribas, Agricultural credit, Societe Generale and Axa fell between 1.87% and 2.48% on the eve of the start of the quarterly earnings season of the major American banks. Also under pressure, the automotive sector lost ground, like Renault (-2.13%) or Stellantis (-2.2%). Conversely, the European number one – and third world player – in the production of glass bottles and jars Veralia was awarded 0.75% thanks to a note from Jefferies, which begins the coverage of the title with a board of “purchase” and a target price of 37 euros.
Finally, EDF has asked for the trading of its shares to be suspended until further notice. They remain on a last course of 10.225 euros. The State has made known its intention to acquire the shares of the group that it does not hold in order to increase to 100% of the capital. The Ministry of Finance said in a statement that “The State is currently carrying out work to define the terms and conditions and will specify its intentions no later than July 19, 2022 before the market opens. »