The Paris Stock Exchange rises and Wall Street should follow amid easing expectations of a “mega-hike” in US Federal Reserve rates and reports that China is pressuring banks to facilitate financing projects of the country’s major property developers. The market nevertheless remains on its guard three days before the ECB’s monetary decision and the end of maintenance operations on the Nord Stream 1 gas pipeline. The quarterly results season continues in the United States, particularly in the banking sector.
Around 2:30 p.m., the Bedroom 40 increased by 1.07% to 6,100.75 points in a limited business volume of 800 million euros. Elsewhere in Europe, the Dax of the Frankfurt Stock Exchange gains 0.88% and the FTSE Eb Milanese 1.66%. The contracts future on US indices rose by around 1%.
The ECB faces several challenges
Bank of America published a turnover of 22.79 billion dollars for the second quarter, slightly higher than expected, driven by the rise in interest rates and the increase in its credit activity. But earnings per share disappointed at 73 cents, versus 75 expected. The title yields 0.9% before the market. On his side, Goldman Sachs is reported up nearly 4% after reporting better-than-expected revenue and earnings at $11.86 billion and $7.73 per share, respectively, versus $10.86 billion and $6.58 per share expected by the market, boosted by its bond trading activity. 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 present the outline of 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 as 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
Another challenge for the ECB is whether or not Russian gas flows to the Old Continent via the Nord Stream 1 gas pipeline will resume on Thursday. Several European officials fear that the Russian authorities will use the weapon of gas as a means of pressure in the face of sanctions linked to the war in Ukraine.
On the foreign exchange market, the euro is trading at 1.0131 dollar 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 3.3230% 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.
Across the Atlantic, the market is now expecting a “limited” tightening of US Federal Reserve rates to 75 basis points next week. A de-escalation of expectations essentially fueled by the comments of Governor Christopher Waller and St. Louis Fed President James Bullard, considered the most “hawkish” of the members of the monetary policy committee and who favor a ¾ point increase in percentage of the funds funds rate.
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 members of the Fed, expectations benefited from the slowdown in inflation expectations reflected by 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 2.4% to 103.69 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 2.6%, Vallourec 6.2 and GTTwhich manufactures valves for transporting liquefied gas, takes 8%.
Solvay increased by 4.7%. 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 2.8%. 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 3.5% and Kering by 3.6%
The automotive sector continues to rebound. Stellantis and Renault rise by more than 2% and Valeo by 3.2%.
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.