The Paris Stock Exchange is sticking to its positions in this first session of a week rich in corporate publications, but which will be mainly focused on the monetary policy of central banks, starting with that of the Fed. The question is above all whether a change in the pace of rate hikes can be envisaged from December on the other side of the Atlantic in the face of signs of a slowing economy and soaring prices. In the euro zone, inflation hit a twelfth consecutive record high in October.
Around 4 p.m., the Bedroom 40 grabbed 0.10% to 6,279.13 points in a limited business volume of 1.2 billion euros. October nevertheless remains a gainer of 8.96%, its best monthly performance since November 2020. In New York, the Dow Jones loses 0.48%, the S&P500 0.82% and the Nasdaq Composite 1.42%. The three indexes are nonetheless poised to interrupt a cycle of two consecutive monthly losses.
Inflation soars, growth slows
Consumer prices rose 10.7% year on year in October, against 10.2% expected and 9.9% in September. More worrying for the ECB, core inflation (excluding food and energy) reached 5% in October, after 4.8% in September, underlines Andrew Kenningham of Capital Economics. ” We expect inflation to ease next year, but with a still tight labor market, the core rate should hold well above the 2% inflation target targeted by the ECB. Thus, rather than a ‘pivot’ [inflexion] in the near future, monetary officials should opt for a continuation of rate hikes by raising the deposit rate to 3% by mid-2023 “, he warns. GDP growth also slowed markedly to 0.2% in the third quarter, after +0.8% in the second, according to an initial estimate. However, this figure is slightly higher than analysts’ expectations, which forecast a 0.1% increase in GDP.
As expected, the European Central Bank raised its key rates by 75 basis points last Thursday. Bank of the Netherlands President Klaas Knot further estimated on Sunday that the ECB could raise the cost of money by 50 to 75 basis points at its December meeting. ” We’re not at halftime yet the fight against inflation, he said on a Dutch television channel, before adding: we are still in the process of bringing interest rates back to neutral, for which we will still need the December meeting. From 2023, we will play the second half, raising interest rates more modestly and reducing our balance sheethe continued. Then we will be in the zone where we will effectively cool the economy, which is necessary to bring inflation down from 10% to 2% in the next 18 or 24 months. “, he concluded.
The Fed and US jobs in the crosshairs
Global financial markets have recently been buoyed by hopes of a less aggressive approach to interest rates from the Fed starting in December. For now, observers continue to expect a 75 basis point rise in the Fed funds rate at the end of the monetary policy committee meeting on Wednesday, which would be the fourth consecutive of this magnitude. Jim Reid, of Deutsche Bank, nevertheless recalled this morning that the article in the wall street journal at the origin of expectations of an inflection by the American central bank ” indicated that the Fed’s forecast [en matière de hausse des taux] could be revised upwards in 2023. However, the market focused on the possibilities of a short-term slowdown “.
Ipek Ozkardeskaya, analyst at Swissquote, notes for his part that “ whether some Fed officials have raised the possibility of a slower pace of rate hikes (…), chances are Jerome Powell will dash Dovish hopes this week, as he has done this year. If so, we might see the positive market vibes evaporate. “. The Fed Chairman should nevertheless try to calm things down during his post-FOMC press conference on Wednesday evening.
“There has been a lot of talk about a possible shift to a slower pace of tightening as the final rate gets closerrecalls for his part Ian Lyngen, head of US rates strategy at BMO Capital Markets, but the big unknown is whether this flicker of ‘pivot’ will be interpreted as the beginning of the end of the Fed’s hawkish posture or simply as an indication that a lasting restrictive policy will be the new normal “, nuances the expert.
Expected Friday, October employment figures in the United States could also give an indication for the future. On the bond market, the yield on the US 10 bond was slightly up at 4.0447% after rising 9 basis points on Friday. That of the German Bund of the same maturity, which serves as a benchmark in the euro zone, increased by 2 basis points to 2.1260%. Finally The British gilt tightened by 3 basis points to 3.5% while the Bank of England will make its monetary decision on Thursday. A 75 basis point rise in its repro rate is widely expected. But before that, the Bank of Australia will announce its decision tomorrow morning.
In China, activity in the manufacturing sector deteriorated in October, with the official PMI index falling 0.9 points to 49.1, falling below the 50 point threshold that signals a contraction. Weighed down, among other things, by the zero Covid policy, the statistics are fueling fears of a drop in demand for oil, which is weighing on crude oil prices with a decline of 0.6% to 93.29 dollars a barrel of Brent from the North Sea.
On the value side, Orpea and Korian and recover 12.7% and 8.2% respectively after their plunge last week.
Saffron lost 1% as Citi downgraded the title of the engine manufacturer from “purchase” to “neutral”.
Renault decrease of 1%. The French automaker and Japanese Nissan are struggling to strike a deal that would reshape their alliance, with intellectual property one of the sticking points, the Wall Street Journal reports, citing people familiar with the matter.
Air France-KLM loses another 3.8%. Despite the better-than-expected quarterly results announced on Friday, analysts remain skeptical about the group’s ability to achieve objectives deemed too ambitious.