After having sold more than 3%, the Paris Stock Exchange reduced its losses, while the futures contracts on American indices returned to the green. According to the press, Russian Foreign Minister Sergei Lavrov offered Vladimir Putin to continue diplomatic efforts with the United States and NATO. The Russian president would have accepted this proposal. The market is nonetheless expecting an intervention from James Bullard, the very “hawkish” president of the St. Louis Fed.
Geopolitical tensions escalated over the weekend following comments by White House National Security Adviser Jake Sullivan, who said a Russian intrusion could happen at any time, even ” before the end of the Beijing Olympics “. For its part, Kiev indicated this morning that its membership of the European Union and NATO remained a priority, a stone in the garden of Moscow which makes the promise of Ukraine’s non-membership of NATO a central requirement. It is in this context that the German Chancellor Olaf Scholz must go to Kiev on Monday, then to Moscow tomorrow.
Around 2 p.m., the Bedroom 40 fell 2.01% to 6,845.64 points in a supplied volume of 2.6 billion euros. In Frankfurt on Dax down 1.96%, while March futures contracts on Dow Jones and Nasdaq 100 are stable.
Banks and airlines under pressure
In Europe, the 19 Stoxx 600 sector indices are in the red, starting with those of leisure travel (-3.1%), banks (-2.9%), and technology (-2.7%). ).
Societe Generale and BNP Paribas lost 4.4% and 4.6% respectively, weighed down by a “flight to quality” in favor of government bonds whose yields eased due to geopolitical tensions. The yield on the 10-year US bond is back around 1.9560%, against more than 2% at the end of last week. That of the German Bund of the same maturity relaxes by 6 basis points to 0.2330%.
Geopolitical risk affects airlines as several of them have suspended flights to Kiev. This is notably the case of KLM, the Dutch subsidiary ofAir France-KLM (-4.2%), while Lufthansa (-3.8%) is monitoring the situation closely. The sector is also affected by the high level of oil prices as the barrel of Brent crude hit a seven-year high of 96.16 dollars this morning before returning to around 94 dollars.
“High tech” and other growth stocks considered expensive are also among the biggest declines of the day, like STMicroelectronics (-3%) and LVMH (-2.4%).
Bullard and a surprise Fed meeting on the agenda
Markets also fear that the US Federal Reserve will raise interest rates outside of a scheduled meeting of its monetary policy committee (FOMC). Rumors circulated on Friday, fueled by the announcement of a meeting of the board of governors on Monday, but it seems that it would be a routine meeting, especially since the Fed has repeatedly indicated that would not raise rates until it ended its asset purchase program. However, a press release must be published at the end of this meeting.
Monetary policy will remain in the news this week with the intervention of several Fed officials, including that of James Bullard, the president of the St. Louis Fed, this Monday as part of the Squawk Box show on CNBC at 2:30 p.m. Reputed to be “hawkish”, James Bullard had destabilized the markets by declaring that he expected a rate hike of 100 points by July 1. Frightened, by his own admission, by the surge in inflation to a 40-year high, he also did not rule out tightening outside the scheduled FOMC meetings.
Other Fed officials, such as Mary Daly of the San Francisco branch, were less alarmist, saying a 50 basis point tightening in March could destabilize markets. But a more aggressive Fed stance is already priced in.
The American central bank must also publish Wednesday the “minutes” of the meeting of January 25 and 26 and could give on this occasion indications on the internal debate within the monetary policy committee. But before that, Christine Lagarde will be heard by the European Parliament as part of a debate on the annual report of the European Central Bank. His appearance is scheduled for 5:15 p.m.