The Paris Stock Exchange is progressing and Wall Street is doing the same at the opening against a backdrop of calm in the expectations of a “mega-rise” in the rates of the American Federal Reserve. The market is also welcoming reports that China is pressuring banks to facilitate project financing for major property developers in the country. But caution remains in order three days before the ECB’s monetary decision and the end of maintenance operations on the Nord Stream 1 gas pipeline, while the resumption of Russian gas flows to Europe is far from guaranteed.
Around 4 p.m., the Bedroom 40 increased by 1.20% to 6,108.51 points in a limited business volume of 1.1 billion euros. Elsewhere in Europe, the Dax of the Frankfurt Stock Exchange gained 0.87% and the FTSE Eb Milanese 1.20%. In New York, the Dow Jones rises by 0.78% and the Nasdaq Composite by 1.47%.
Force majeure at Gazprom
The nervousness is all the more palpable as Gazprom has declared force majeure on gas supplies to at least one major European customer, Bloomberg and Reuters report, citing a letter dated July 14. The letter says Gazprom, which has a monopoly on pipeline gas supplies, could not fulfill its gas supply obligations due to “extraordinary” circumstances beyond its control. According to Bloomberg, citing market sources, the force majeure event relates to gas transiting through Nord Stream 1.
Several European officials fear that Moscow will use the weapon of gas as a means of pressure in the face of sanctions linked to the war in Ukraine. In anticipation of the risk of a Russian gas cut, the European Commission on Monday finalized a new agreement with Azerbaijan for an increase in its gas deliveries to Europe to bring them to at least 27 million cubic meters at horizon 2027.
The ECB faces several challenges
On Wall Street, Goldman Sachs rose nearly 3.7% after announcing better-than-expected revenue and earnings of $11.86 billion and $7.73 per share, respectively, compared to $10.86 billion and $6.58 per share anticipated by the market, boosted by its bond trading activity. Bank of America gains for its part 1.1% after reporting a turnover, slightly higher than expected, driven by the rise in interest rates and the progress of its credit activity. But earnings per share disappointed at 73 cents, against 75 expected, penalized by its investment banking activities. Boeing gained 3.7%, boosted by an order for 100 737 Max 10s by Delta Air Lines. IBM will release its quarterly results after the close of Wall Street.
The ECB is preparing to raise its key rates by 25 basis points on Thursday in order to contain inflation, which reached 8.6% in the euro zone in June, and whose final figures will be published tomorrow. The central bank must also outline the mechanism intended to prevent the risk of fragmentation in the region and in particular a surge in the yields of the most fragile countries, such as Italy.
The ECB will also have to take into account the political risk while Mario Draghi will seek a vote of confidence from the Italian Parliament on Wednesday. On this vote will depend the possible resignation of the President of the Council, whom the President of the Republic had already rejected last week after the refusal of the senators of the 5 Star Movement to vote for a package of aid measures.
The Fed in a blackout
On the foreign exchange market, the euro is trading at 1.0159 dollars after foraying below parity for the first time in 20 years at 0.9955 on Friday. On the bond market, the yield on the Italian 10-year BTP tightened by 6 basis points to 3.3240% after a peak at 3.48%, which propelled the spread with the German Bund of the same maturity to around 235 points basis, its highest level in more than a month.
Last week, the rise in consumer prices to 9.1% year on year in June in the United States had fueled fears of a 100 basis point hike in Fed rates. Beyond comments from central bank officials, expectations benefited from the slowdown in inflation expectations reflected in the University of Michigan consumer confidence survey. The Fed entered a blackout on Saturday ahead of the July 26-27 FOMC meeting, a period during which none of its members can speak publicly.
Solvay will raise its objectives for 2022
A barrel of Brent from the North Sea rose 4.7% to 105.95 dollars, while gas prices also rose in Rotterdam, the heat records in Europe leading to intensive use of air conditioning systems. In Paris TotalEnergies wins 3.5%, Vallourec 6.2% and GTTwhich manufactures valves for transporting liquefied gas, takes 9.8%.
Solvay increased by 4.9%. The chemical group plans to raise its forecast for the whole of the 2022 financial year after a performance significantly above expectations in the second quarter. It is counting on a turnover of between 3.4 and 3.5 billion euros in the second quarter on the basis of preliminary figures and on an underlying gross operating surplus of 855 to 865 million. The quarterly accounts will be published on July 28.
Nexans gains 3.1%. Societe Generale raised its recommendation on the cable manufacturer from “hold” to “buy”.
The other major cyclicals such as banks and luxury stocks are also well oriented. Societe Generale advance of 4.1% and Kering by 3%
An association of employee shareholders and former employees ofEDF announced its intention to lodge a criminal complaint with civil action “against the state for” business distress “. The action remains suspended from listing until further notice and the State will announce its intentions on the nationalization of the electrician on Tuesday at the latest.