The Paris Stock Exchange is back in color like other European markets after the announcement of a surprise meeting of the Board of Governors of the European Central Bank to discuss current market conditions. It should start at noon. This decision comes at a time when the spreads (yield differences) between the government bonds of the various countries of the euro zone have recently widened, in particular between Germany and Italy.
Mid-session, the Bedroom 40 rebounded 1.05% to 6,012.41 points in a business volume of 850 million euros. In Milan, the FTSE MIB increased by 2.37%. The contracts future June on US indices gain between 0.5% and 0.6%.
The recent surge in government bond yields of the so-called peripheral countries follows the absence of any concrete announcement from the European Central Bank concerning new tools intended to avoid fragmentation within the countries of the euro zone. The market is therefore speculating on the announcement of a mechanism intended to protect the most indebted countries in the region, such as Italy or Greece, and avoid a new financial crisis when the ECB announced last Thursday the cessation of its asset purchases at the end of the month and a 25 basis point hike in its key policy rates at its July meeting.
Pending clarification on this anti-fragmentation mechanism, the yield on the Italian 10-year bond, which this week crossed the 4% mark for the first time since 2014, eased by 20 basis points to 3 .96%, bringing the spread with Germany to 2.19%, against more than 2.4% the day before, while maintaining sight of its highest since the health crisis in May 2020. Analysts are showing d Moreover, they are skeptical about the tools that the ECB will present and fear that the soufflé will fall in the event of disappointment.
Be that as it may, the Stoxx 600 of banks signs the best sector performance in Europe with a gain of 2.6%. In Paris, BNP Paribas, Agricultural credit and Societe Generale increased by nearly 3%.
50, 75 or 100 basis points for the Fed?
The market is also wondering about the extent of the next monetary hike by the Fed, whose decision is expected in the evening, with the fear in sight that too heavy a hand could lead to a recession.
From an increase of 50 basis points at the end of last week, expectations have risen in light of the surprise surge in inflation, now at its highest since the end of 1981 in the United States. The market expects an increase of 75 basis points, which would be unprecedented since 1994, or even 100 basis points.
” We previously expected Fed rates to peak in the 3.25% to 3.5% range in the first half of next year. This forecast is obviously too low, and the peak could now be closer to 4%. But we will wait to see the new economic projections from the Fed and the dot plots. [graphique en points illustrant les anticipations du FOMC en matière de taux d’intérêt] before confirming these forecasts says Paul Ashworth of Capital Economics.
The yield on the two-year US bond is hovering around 3.38% after hitting 3.456%, its highest level since 2007, while that of the 10-year maturity is trading at 3.4224%. US treasury bills serve as a global benchmark, thus financial conditions are tightening across the planet, which is putting strong pressure on consumer purchasing power, especially in emerging countries, which borrow in dollars. .
All options are open for EDF
EDF rises 1.6%. ” All options are on the table” when it comes to the electrician’s future84% controlled by the State, declared on BFM TV the French Minister of Economy and Finance, Bruno Le Maire, when asked about a possible nationalization of the group.
Luxury stocks are recovering in the wake of the announcement of better than expected indicators in China, one of the main markets for the sector. Kering notably garners 1.8%. Jefferies raised its recommendation on the title of the parent company of Gucci from “hold” to “buy” while reducing its target price from 695 to 605 euros.
Airbus appreciated by 0.8% and Saffron 1.6% following a favorable aerospace rating from Berenberg, who sees “clearer skies on the horizon” for demand in the aerospace and defense sector.
Biggest rise in SRD, Faurecia takes 7.7%. Stifel analysts point out that once past the capital increase linked to the takeover of Hella, investors can focus on disposals. The broker is “buying” on the stock.
Conversely, Atos loses another 5.8% after falling more than 23% yesterday. Invest Securities downgraded the stock from “buy” to “neutral”.