The Paris Bourse has almost erased its losses from the day before thanks to a wave of cheap purchases. This movement was encouraged by the reversal of the Nasdaq at the close on Monday, after a decline of more than 2% in session. The technology Stoxx 600 posted the best sector performance with a gain of 2.2% the day after a decline of 3.6%, which took the index to a low of nearly three months, against a backdrop of tensions in the fixed income markets.
Analysts remain positive on equities after the strong performance of 2021 and a start to the year marked by the Fed’s interest rate warning. ” If investors are to prepare for volatility as markets adjust to a more offensive line from the Fed, as well as the latest wave of Covid-19 infections, we still expect the rally to pick up. Writes Mark Haefele, investment manager at UBS Global Wealth Management.
Around 12:30 p.m., the Cac 40 rebounded 1.19% to 7,200.13 points in a business volume of 1.13 billion euros. The contracts futures March on US indices gained between 0.2% and 0.5%.
Four rate hikes expected this year
Investors are therefore taking advantage of the recent decline in equities following the change in perspective of the US Federal Reserve. The latter considers that the recovery of the American economy is sufficiently solid to support a tightening of its monetary policy in order to counter inflation. The market is awaiting comments from Jerome Powell on this point, hoping for indications on the timing of the Fed’s rate hikes.
The market is also positioning itself for the statistics of consumer prices in the United States, scheduled for Wednesday, to see if inflation will cross the 7% mark, as expected. And while the price hike hit a record 5% in December in the euro area, Philip Lane, the ECB’s chief economist, told the daily Il Sole 24 Ore that he did not expect inflation to stay above the 2% target in the medium term.
Does the Fed have an interest in sowing chaos?
From two to three rate hikes anticipated until recently, the market now expects four Fed tightening this year, as well as the implementation of its balance sheet reduction process in the second half of the year. Some observers believe, however, that several transient factors such as tensions on supply chains and disruptions related to the Omicron variant should subside, which could give the central bank more leeway.
” The question is, does the Fed have any interest in wreaking havoc on the markets for the sole purpose of fighting inflation? The answer is no, says Ipek Ozkardeskaya, senior analyst at Swissquote. And to continue: this is why everything will depend on the indicators and, in view of the recent ‘hawkish’ reversal of the market, it is possible that we will see a calming of this positioning, which could lead to a favorable correction after the recent selloff on equities “.
Luxury and “techs” shine again
In remarks sent to parliamentarians before his hearing by the Senate this afternoon, Jerome Powell indicates that the Federal Reserve will do everything to prevent inflation from taking hold. He adds that the nature of post-pandemic growth may be different from previous periods of expansion. ” The pursuit of our objectives will have to take this difference into account. “, did he declare. Senators are expected to confirm Jerome Powell’s reappointment for a second term at the head of the Fed, and they will be sure to question him about the price pressures and the timing of the rate hikes.
Biggest increase in the Cac 40, Kering 3.3% advance. RBC, which is “outperforming” on value, believes that the group is one of the players in the luxury sector most likely to make a significant acquisition this year given the strength of its balance sheet. In addition, its flagship brand, Gucci, should experience an acceleration in its growth, while that of the rest of the sector should stabilize, writes the author of the note. RBC has also raised its price target on LVMH (+ 1.5%) from 785 to 820 euros. Hermes takes 1.7%.
Capgemini gains 3.1%. Jefferies took over the cover of the SSII with “purchase” to target 270 euros. Other technology stocks are also picking up colors in the wake of the Nasdaq. STMicroelectronics earn 2%, Dassault Systèmes 2% and Teleperformance 1.6%.
Aperam gains 6.6%. Deutsche Bank has resumed monitoring the “buy” stocks with a price target of 67 euros.
Finally, Technip Energies wins 7%. The group has announced that it will buy back 1.8 million of its own shares from TechnipFMC, which reported the sale of 9 million shares for 118.4 million euros. TechnipFMC has decided to exit from the Parisian coast.