The Cac 40 gives itself a burst of pride despite record inflation in the euro zone

Up 1.32% at the best of the session, the Paris Stock Exchange remains in view of its highest levels of the day. This progression looks like a burst of “bear market” while the Cac 40 is about to align a sixth weekly loss in seven weeks. The summer rally melted like snow in the sun with the “hawkish” turn taken by central banks, soaring inflation, the specter of recession and rising tensions between Russia and Western countries.

Vladimir Putin has just announced the creation of four Russian administrative regions in Ukraine, thus formalizing the annexation of the territories consulted by referendum. The inhabitants of Luhansk, Donetsk, Kherson and Zaporizhya thus become ” our citizens forever said Vladimir Putin. He also called on Ukraine to stop fighting and resume negotiations, while ruling out any discussion of the territories it has just annexed. The American reaction was swift, as the Biden administration announced new economic sanctions against many Russian regime officials and companies in response to the illegal annexation of Ukrainian regions.

The bullish movement is also encouraged by the easing observed on the bond markets at the end of a particularly turbulent week with the emergency intervention of the Bank of England to try to restore calm after the criticisms aroused by the plan to reduce debt-financed tax bill presented by the British government.

ECB: towards an increase of at least 75 basis points

Investors this morning took the shock of a record inflation rate in the euro zone. The rise in consumer prices having reached 10% over one year in the first estimate for September, against 9.7% anticipated by the market and 9.1% in August. The statistic comes the day after the announcement of double-digit inflation in Germany, the first since 1951, and reinforces expectations of energetic action by the ECB.

Given the strength of inflation and continued signs of price pressures, we expect the ECB to raise rates again by at least 75 basis points at its end-October meeting, at a minimum of 1.5%reacts Jessica Hinds, senior economist for the euro zone at Capital Economics. And, despite the risks of a deeper recession, we are not ruling out a larger upside. Overall, we expect the main deposit rate to reach 2% before the end of the year, with further hikes to follow early next year that would take it to 3%. And the risks of that happening remain on the upside. “, she warns.

At around 4:30 p.m., the Bedroom 40 gained 1% to 5,733.74 points. For now, the index is losing 0.9% over the July-September period, thus aligning three consecutive quarters of decline, the longest series since 2009. In New York, the Dow Jones is stable and the Nasdaq Composite takes 0.7%. Nike plunges 11%. The sports equipment maker lowered its annual margin forecast and saw its inventories jump 44% in the past quarter. In Europe, Puma fall of 8.4% and Adidas by 5.7%.

The Fed determined even in a recession

US household income rose 0.3% in August, as expected, and spending rose 0.4%, twice as much as expected. The “core” PCE index of personal consumption expenditure, the measure of inflation favored by the Fed, stands at 4.9% over one year, against 4.6% in July and 4.7% expected. Also scrutinized by the central bank, the 1-year inflation expectations component fell slightly to 4.7%, according to final data from the University of Michigan survey for the month of September, after 4.8 % in August.

The prospect of a cycle of permanently high interest rates is regularly hammered home by Federal Reserve officials. James Bullard, president of the St. Louis branch, said yesterday that investors will not be able to escape sharp rate hikes in the coming months, while his Cleveland colleague Loretta Mester warned that a recession n would not prevent the Federal Reserve from tightening its monetary policy.

Cyclical stocks, particularly technology stocks, banking stocks and those linked to raw materials are benefiting from bargain purchases which could result from balance sheet dressing operations on this last day of the third quarter. BNP Paribas thus gaining 1.4%, Capgemini 2.8% TotalEnergies 1.6%, Publicis 2.7% and Unibail-Rodamco-Westfield 5.4%.

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