The word is out: “recession”. The term, which had been back for several weeks in the vocabulary of economists, is now in the mouths of central bankers. On Wednesday, then again on Thursday, the chairman of the American Federal Reserve (Fed), Jerome Powell, who was hearing before Congress, admitted that the gradual rise in interest rates Fed-funds, designed to counter inflation, is likely to cause a recession. This is characterized from a technical point of view by the decline in GDP for two consecutive quarters. Now, the worst-case scenario is envisaged as the Fed has so far tried to temporize and spare the markets by talking about a soft landing for the economy. ” After Deutsche Bank, Nomura and Goldman Sachs, it’s now Citigroup’s turn to predict a recession “, notes John Plassard at Mirabaud Securities. For its part, Pimco, one of the main bond investors in the world, judges the risk of recession ” raised for the next two years and also evokes that of ” financial accidents “.
The latest activity indicators support the scenario of a slowdown. In the euro zone, the preliminary PMI S&P Global composite index (synthesis between industry and services) fell to its lowest level for 16 months at 51.9 points in June, against 54.8 in May. He undergoes the cost of living shock and deteriorating business and consumer confidence says Chris Williamson, chief economist at S&P Global. For Ricardo Amaro, senior economist at Oxford Economics, “ the results mark a significant break from recent PMI readings, which had shown some initial resilience in the face of numerous headwinds clouding the eurozone economic outlookhe points out. The breakdown of the numbers indicates a general slowdown. The manufacturing sector continues to show particular weakness […tandis que] service expansion lost momentum in June. In the United States, growth in private sector activity slowed in June and the new orders index even contracted for the first time in nearly two years.
Equities and commodities under pressure
As a result of these fears, European equity markets continued their slide. In Paris, the Bedroom 40 hesitated before ending down for the twelfth time since the beginning of the month, dropping 0.56%, to 5,883.33 points, in a transaction volume of 3.5 billion euros. On the other side of the Atlantic, the major indices are resisting thanks to technological stocks. Nevertheless, the S&P500, which serves as a benchmark for US managers, is about to complete the worst first half since the presidency of Richard Nixon, according to data compiled by Bloomberg. ” Leading indicators for the US economy are all deteriorating. Household sentiment also hit a record low in response to inflation at its 40-year high. As if that weren’t enough, the S&P 500 and the Nasdaq are in a “bear market” [marché baissier]. Since when has the Fed raised its rates so strongly in such a degraded environment? “, worries Troy Ludtka, economist at Natixis.
In the wake of equities, commodity prices are falling, like copper, which fell to its lowest level in 16 months at 8,564.5 dollars per tonne. Crude prices are also affected. the Brent drops 7% in five days. The decline was accentuated by the portfolio dressing operations undertaken by many American and European funds as the end of the half-year approached.
Valneva takes off on recovery
On the values front, the leader in bio-analysis Eurofins Scientific climbed 4.2% as opinion raised by Deutsche Bank, changed from “sell” to “keep”. The broker maintains its price target at 80 euros. In another sector, he initiated the coverage of the video game publisher Ubisoft (+1.81%) with a “buy” advice and a target price of 60 euros.
Atos climbed 6.18%. Thales would have the support of the Ministry of Economy and Finance and the Directorate General of Armaments to try to take over the cybersecurity activities of the digital services group, according to BFM Business. Finally, suspended since the opening, the quotation of the title Valneva resumed at 4:30 p.m. with a surge of 19.62%. The Franco-Austrian biotech has received a positive opinion from the Committee for Medicinal Products for Human Use of the European Medicines Agency (EMA) for marketing authorization for its candidate vaccine against Covid-19, VLA2001, for a use in primary vaccination in adults (18 to 50 years).