The Paris Stock Exchange is down slightly on Monday morning. Investors are wary of any initiative at the start of the week marked by the meeting of the Fed’s monetary policy committee, as well as by a wave of corporate publications in Europe and the United States. Not to mention the geopolitical risk. The right orientation of contracts future on US indices, however, helps to contain the market decline.
At 9:35 a.m., the Bedroom 40 lost 0.46% in points to 7,035.93 points in a business volume of 380 million euros.
On the macroeconomic front, business growth slowed in the French private sector. The composite PMI index (synthesis between industry and services) established by IHS Markit fell by 3.1 points to 52.7 in January, held back by both the manufacturing sector (-0.1 point to 55, 5) and that of services (-3.9 points to 53.1). The market expects around 10 am the results of the survey for the whole of the euro zone, which will be followed this afternoon by that concerning the United States.
In New York, big-cap tech companies were particularly hard hit, with the Nasdaq Composite having its worst week since March 2020 with a drop of 7.6%. The index is now losing more than 14% since its peak in November, thus sinking a little further into the correction zone. The change of course announced by the US Federal Reserve is no stranger to this development.
The Fed on the front line
The central bank’s monetary policy committee, which meets on Tuesday and Wednesday, should confirm expectations of four hikes in its key rates this year and the end of its asset purchases, with a first hike expected in March, before a reduction in the size of its balance sheet this summer.
Goldman Sachs economists fear that the Federal Reserve will be more aggressive than the big Wall Street banks anticipate. They expect rate hikes in March, June, September and December and a reduction in its balance sheet in July. “We see a risk that the FOMC decides to tighten its policy at each meeting until the perception changesthey write, adding that this reinforces the possibility of a rate hike at every meeting or an earlier-than-expected balance sheet announcement in May “.
The first publications of results were mixed to say the least in the United States, particularly in the banking sector, while Netflix was pessimistic about its subscription forecasts. This week, about a third of the S&P 500 companies are due to publish their quarterly results, and in particular the first two American capitalizations: Apple and Microsoft, not to mention Tesla and several Dow Jones heavyweights such as Boeing, Caterpillar, GE and 3M.
Exane BNP Paribas positive on Renault
The macroeconomic agenda for the week is also loaded with the first estimates of fourth quarter GDP in Europe and the United States, and the PCE index of US household spending, the measure of inflation most watched by the Fed.
Tensions between Russia and Ukraine are also being closely watched. The State Department has called on Americans to leave Ukraine immediately as Moscow is massing more troops on the border between the two countries. Washington has also ordered the families of its embassy staff in Kiev to leave Ukraine.
Renault rose 3.5% as Exane BNP Paribas raised its recommendation on the stock from “neutral” to “outperform”. The alliance formed by the French manufacturer, Nissan and Mitsubishi is expected to announce on Thursday a plan to invest 20 billion euros in electric vehicles, Reuters said, citing two people familiar with the project.
Among other analyst notes, EDF down 1.3%. Bernstein downgraded the value from “outperformance” to “in-line performance” and reduced its price target from 14.50 to 8.50 euros.
Orange gains 1.1%. The telecom operator is in the process of appointing Christel Heydemann as general manager as part of an overhaul of its governance, reports Reuters, citing sources familiar with the matter.
The major technologies, on the other hand, are losing ground, such as Capgemini (-2.1%) or Worldline (-5%).
Wendel lost 1.2%. The investment company announced that it had signed an agreement to acquire 99% of the capital of the Association of Certified Anti-Money Laundering Specialists (ACAMS), an American company dedicated to the fight against financial crime. The amount of the operation could value ACAMS up to 355 million dollars (314 million euros).