The Paris Stock Exchange is moving on an erratic note after suffering its biggest drop since early March last week. The trend is weakened by the political risk in France after the inability of the presidential coalition to obtain an absolute majority in the National Assembly. A failure that jeopardizes its reform projects and comes on top of fears of recession fueled by soaring inflation and the tightening of monetary policies by central banks. Volatility is also increased by the low trading volumes, with barely 700 million euros on the values of the Cac 40, due to the closure of Wall Street on Monday for the first celebration of Juneteenth, commemorating the abolition of slavery, at the federal level.
Mid-session, the Bedroom 40 is stable at 5,886.33 points (+0.06%). Elsewhere in Europe, the Dax of the Frankfurt Stock Exchange takes 0.35% and the FTSE Eb Milanese 0.26%.
Jerome Powell facing Congress
The specter of sustained inflation is on everyone’s mind as producer price inflation hit 33.6% YoY in Germany in May, a new record. The European Central Bank announced last week that it was considering a tool that would help avoid fragmentation that would weaken the most indebted countries in the euro zone as the central bank announced the end of its asset purchases. and that it will raise its key interest rates by 25 basis points next month.
In the United States, Jerome Powell will be heard on Wednesday and Thursday by both chambers of Congress as part of his semi-annual monetary policy speech. He should on this occasion repeat that the Federal Reserve will do everything to fight inflation, which reached a record 8.6% over one year in May. The Federal Reserve raised the fund funds rate by 75 basis points last Thursday, the sharpest tightening since 1994.
Global equities between two corrections
Fed Governor Christopher Waller said he will support a 75 basis point hike in the Fed funds rate in July if the next economic indicators turn out to be in line with his expectations. Cleveland Fed President Loretta Mester believes that the risk of recession is increasing and that it will take several years to reach the 2% inflation target.
” I think we are between two corrections for equities globallybelieves Francesco Sandrini, head of multi-media strategy at Amundi. The first 20% of the fall in equity markets is due to valuations, he says, referring to the fact that higher interest rates lower the net present value of future corporate profits in investors’ models. And to conclude that we could see an additional 10% earnings related decline, reflecting continued inflation and due to the higher risk of recession “.
Valneva boosted by Pfizer, Saint-Gobain falls
Valneva jumped 19.3%. The pharmaceutical group has announced that Pfizer will acquire 8.1% of its capital for 90.5 million euros. The investment will be made at a price of 9.49 euros per share, by the ” through a reserved capital increase intended to strengthen the strategic partnership concluded between the two companies on Lyme disease the company said in a statement.
Biggest drop in the Cac 40, Saint Gobain loose 5.2% in the wake of the fall nearly 12% of the Irish Kingspan in London. The insulation materials specialist announced that its markets have deteriorated over the past two months with a significant deterioration in order volumes compared to the same period last year.
Conversely, Renault increased by 6.9%. Jefferies raised its recommendation on the automaker from “hold” to “buy” and raised its price target from 22 to 40 euros. In its wake, Valeo and Faurecia rise by 3.7% respectively. And 2.8%
Air France-KLM appreciated by 3.7%. The International Aviation Association (Iata) forecasts a return to profits for companies in the sector next year thanks to an improvement in travel demand.