The Paris Stock Exchange reduced its lead, its flagship index falling below the 6,000 point threshold, crossed upwards in session for the first time since Thursday last week, the day before the publication of better than expected American employment figures and reflecting a still tight labor market. Wall Street lost ground in the first hour, the day after an extraordinary session, characterized by an unprecedented margin of variation since March 2020.
Government bond yields rise to daily highs as UK Prime Minister Liz Truss confirmed the ousting of Chancellor of the Exchequer (Finance Minister) Kwasi Kwarteng and his replacement by ex-Secretary Jeremy Hunt of State for Health. A change that could presage an about-face after the “mini budget” providing for a reduction in taxation on high incomes, at the origin of the emergency interventions of the Bank of England, which end today today.
Around 4:30 p.m., the Cac 40 gained 1.20% to 5,949.79 points, in a business volume of 2 billion euros. In New York, the Dow Jones loses 0.45%, the S&P500 1.10% and the Nasdaq Composite 1.36%. Morgan Stanley fell 4% after quarterly results below expectations, particularly in the investment banking division, whose revenues fell 55% over one year. Citigroupwhose net banking income came out above expectations, advanced by 3.3%. JPMorgan Chase, which also beat the consensus, gains 4%. same for me Wells Fargo, which rises so much.
An intraday spread of 5.2%
On the macroeconomic level, retail sales stagnated in September in the United States, where the market was expecting an increase of 0.2% (+0.4% in August). Excluding automobiles, they rebounded by 0.1%, compared to an expected decline of 0.1%. The preliminary index of consumer confidence compiled by the University of Michigan rose 1.2 points to 59.8 in October, more than the 58.8 expected. Conversely, the one-year inflation expectations component, closely followed by the Fed, accelerated to 5.1%, after 4.7% in September, where the market was hoping for a slowdown to 4.6%.
The market continues to wonder about the scale of the movements that followed the release of inflation figures on Thursday, which saw the S&P 500 move in a range of a magnitude not seen since March 2020 before closing on a gain of 2.6%.
Returning to the dramatic trend reversal on Wall Street yesterday, Deutsche Bank’s Jim Reid describes the timeline of events. ” If you’re still looking to explain the unexplainable, Bloomberg suggested that the S&P 500 gave up 50% of the post-Covid rally to the daily low, triggering technical buying programs. Who knows if this is true? To give you an idea of the magnitude of the move, S&P futures gained 1.57% ahead of the CPI. [indice des prix à la consommation], then lost 2.40% nearly an hour later, but the main index closed up 2.60%, dramatically breaking a streak of six consecutive declines, and this despite a CPI that appears as more bad news from whatever angle you look at it. The index saw a remarkable intraday spread of 5.52% “.
150 basis points by the end of the year?
Expectations regarding the Fed’s continuation of a restrictive policy have not diminished, however. Quite the contrary. The market is now pricing in two 75 basis point hikes in the cost of interest at the next two Fed meetings, whereas it was previously anticipating a 75 basis point hike in November, followed by another 50 basis points in December.
” The Fed certainly cannot be satisfied with the results of inflation which, on the contrary, could accentuate its concern. With rises like the current one, core inflation would in fact rise from 6.6% today to a cruising speed of 7.5% from the middle of next year; a trend that it cannot accept and which means, at least in the short term, an accentuated tightening of monetary conditions warns Véronique Riches-Flores of RicheFlores Research in a note.
Lotery (FDJ) rose by 2.6%. The gambling operator raised its 2022 targets after posting 12% revenue growth in the third quarter. It is now targeting a turnover growth of more than 8% and an EBITDA margin (gross operating surplus) of around 24% this year.
The luxury sector achieves one of the best sectoral performances this Friday, LVMH, Hermes and Kering earning more than 2%.
Other support from the Cac 40, TotalEnergies takes another 1.4%, still supported by the warning of the International Energy Agency on the risk of soaring oil prices after the reduction of production by OPEC +. Barclays has also reiterated its recommendation to “overweight” the title, while Exane BNP Paribas and Oddo BHF maintain their opinion of “outperformance”.
Thales lost 2.2% while JPMorgan lowered its target price from 150 to 143 euros, we are maintaining its opinion of “outperforming”.