The Paris Stock Exchange is up sharply, thus continuing its momentum from yesterday, driven in particular by information from Bloomberg evoking new stimulus measures in China. According to the agency, the Chinese Ministry of Finance plans to authorize local executives to issue 1.5 trillion yuan of bonds in the second half, which would constitute an unprecedented acceleration in the financing of infrastructure.
Investors venture to hope that the signs of an economic slowdown will encourage central banks to exercise restraint in their monetary tightening strategy. At the European level, apart from leisure travel, the 18 other Stoxx 600 sector indices are in the green, starting with basic resources (+5.5%), automotive (+3.9%), oil -gas (+3.7%) and banks (+2.4%). ArcelorMittal earns 4.9%, TotalEnergies 2.6%, Vallourec 6.9%, Plastic Omnium 6% and Societe Generale 2.4%.
Mid-session, the Bedroom 40 increased by 1.41% to 5,995.87 points, after a peak at 6,018.85 (+1.80%), in a business volume of 920 million euros. Elsewhere in Europe, the Dax German gains 1.40% and the FTSE Eb Milanese 2.03%. The contracts future on American indices appreciated by 0.3%.
“Contained” expectations
The “minutes” of the meeting of the Fed’s monetary policy committee in mid-June confirm the US central bank’s determination to stem inflation, albeit at the cost of a slowdown in activity. This meeting ended with the announcement of a 75 basis point hike in the Fed funds rate, the largest since 1994.
The magnitude of the next rate hike, expected at the end of the month, 50 or 75 basis points, ” will depend on the next data, and in particular the employment report for June (expected on Friday) and consumer prices for the same month (expected next Wednesday)says Paul Ashworth, chief US economist at Capital Economics.
He adds that comments from Fed officials that came after the June meeting suggested that a 75 basis point rate hike was the most likely option at the end of July. But recent developments suggest that the odds of a 50 or 75 basis point tightening are 50-50. “. For his part, Jim Reid, strategist at Deutsche Bank, notes that: “ the recent weakening in data has helped equities by containing Fed expectations “.
Johnson resignation rumours, pound rises
The European Central Bank will take over this Thursday by publishing the minutes of the last meeting of its Governing Council, during which a 25 basis point tightening of key rates was announced for July. These minutes could also refer to the discussions on the development of a tool intended to limit the risks of fragmentation between the heart and the periphery of the euro zone.
On the commodities front, a barrel of Brent North Sea is trading just above $100 at 101.33, after falling more than 10% since the start of the week.
On the bond market, the yield on the 10-year US bond tightened by 5 basis points to 2.97%%, but remained below that of the 2-year maturity, in a movement qualified as an inversion of the yield curve, which generally reflects fears of a sharp slowdown in economic activity.
On the foreign exchange market, the euro is approaching parity with the greenback at 1.0205 dollars, thus maintaining a 20-year low. The pound rose 0.6% to $1.1998 on news reports of Boris Johnson’s resignation.