Traditionally critical for the financial markets, the month of May is off to a bad start on the Paris Stock Exchange. The stagnation of manufacturing activity in the eurozone is indeed on top of a contraction in China, thus reinforcing fears of a slowdown in the global economy. The PMI index compiled by S&P Global stood at 55.5 points within the Nineteen in April, a 15-month low, while selling prices rose to a record high.
Around 2:30 p.m., the Bedroom 40 lost 1.93% to 6,407.42 points in a business volume of 1.5 billion euros. The index briefly suffered a “flash crash” and tumbled 3.44% to 6,308.47 driven by a panic that hit the Northern European markets following a likely “big finger” from from a trader. The contracts future June on American indices yield between 0.1% for the Dow Jones and 0.5% for the Nasdaq 100 after the Nasdaq Composite ended its worst month since 2008 on Friday. Activision Blizzard rose 2.1% in pre-market trading in New York. Warren Buffet announced to his shareholders on Saturday that he had raised his stake in the video game publisher to 9.5%.
” Eurozone manufacturing activity nearly stagnated in April as output recorded its weakest expansion since June 2020,” notes Chris Williamson, chief economist at S&P Global. He adds that “Companies surveyed not only reported worsening supply tensions, exacerbated by the war in Ukraine and new health restrictions imposed in China, but also highlighted the impact of price increases and rising uncertainty over economic outlook on the level of demand “, he adds. To follow, this afternoon, the ISM index of manufacturing activity for April in the United States.
The Fed expected on its rates as well as on its balance sheet
In China, the official manufacturing PMI index fell 2.1 points to 47.4 last month, thus emerging below the critical threshold of 50 points, which separates expansion and contraction, for the second consecutive month. The Caixin manufacturing PMI also fell to 46 points, after 48.1 in March. The health constraints that block several cities and many companies in the country do not give hope of rapid improvement.
Markets are also nervous two days before the Fed’s monetary decision, which should raise the federal funds rate by 50 basis points, not seen since 2000. The Federal Reserve is also expected to announce its intentions to cut of the amount of its balance sheet. The more aggressive tone adopted by several central bank officials suggests other major gestures to stem the inflationary spiral. According to CME Group’s FedWatch tool, the market expects the Fed Funds rate to return to 3% or even above by the end of the year.
The European Central Bank could also raise its tone. Vice-President Luis de Guindos has indeed indicated that the ECB could decide to interrupt asset purchases in July, prior to a future rate hike. This will depend on the central bank’s new economic projections, which will be released in June.
Cyclicals and growth stocks under attack
In addition to a higher cost of credit, the tightening of monetary policies raises the specter of recession, especially as price pressures are fueled by the surge in raw materials linked to the war in Ukraine. These could also intensify as the European Union is expected to try to agree this week on the implementation of progressive restrictions on Russian oil imports, which could lead to an embargo towards the end of the year. year, reports Bloomberg, citing sources familiar with the discussions. The barrel of Brent from the North Sea fell by almost 3% to 103.44 dollars, thus weighing on TotalEnergys (-1.1%) and Vallourec (-3.2%).
Cyclical stocks are particularly affected by the deterioration of the economic environment. Alstom loses 4.6%, Schneider-Electric 3.3% and Great 2.3%.
Automakers fell in the wake of the 22.6% drop in new car registrations in France last month, as supplies from European manufacturers remained affected by the war in Ukraine. Renault yields 1.99% and Stellantis 3.2%. same for me Faurecia and Valeo which lose 3% and 3.5% respectively.
Among technology stocks, STMicroelectronics decrease of 3.4%, Soitec by 6% and Capgemini 3.5% in the wake of the Nasdaq’s decline of more than 4% on Friday.
At other growth values, Kering loses 2.9%, Hermes 3.9% and LVMH 2.2%.
Casino plaice by 4.3%. Citi lowered its target price on the title of the distributor from 27 to 17 euros. Pointing to the uncertainties linked to the rescue plan of the parent company Rallye, the broker reaffirmed its recommendation of “neutral” on Casino.
Conversely, Crossroads earns 1.5%. Canadian Alimentation Couche-Tard and British EG Group are discussing a merger to create a global champion of convenience stores and gas stations, reports Dow Jones, citing sources familiar with the matter. The Canadian group had tried in early 2021 to buy Carrefour, an operation which had been refused by Bercy.