The Paris Stock Exchange fell 0.21% on Monday, remaining on the defensive ahead of several central bank meetings later in the week, including the ECB on Thursday, and numerous corporate results.
The star CAC 40 index lost 15.20 points to 7,082.01 points. Friday, the Parisian place had ended stable but its increase exceeds 8% since the beginning of the year.
Economists expect the European Central Bank (ECB) and the Bank of England to raise their main policy rate by another 50 basis points as part of their mandate to fight inflation, after of their meetings on Thursday.
“The problem of inflation is more persistent in Europe and the ECB started much later than the Federal Reserve to raise its rates to counter inflation”, commented Maximilien Monot, portfolio manager of Monocle AM.
Renault’s announcement last week of a 7.5% increase in its budget to support the purchasing power of its employees also shows that there is “pressure on wages in Europe which can be frightening “if it involves stubborn inflation, fueled by wage increases,” he adds.
A 0.2% decline in German gross domestic product in the fourth quarter of 2022 and a slight rebound in inflation in Spain, which reached 5.8% in January over one year, further dampened European investors.
As for the American Federal Reserve (Fed), an increase of a quarter of a point in its interest rates, to reach a range of 4.50% to 4.75%, is anticipated.
Comments from Fed boss Jerome Powell will be scrutinized for information on how many more hikes to expect and how long rates will be kept high.
The markets are banking on an easing of the Fed’s monetary policy and a soft landing in economic activity, ie a drop in inflation without a recession.
The week’s economic statistics will feed into these expectations, notably consumer confidence in Europe and the United States, economic growth in the eurozone and US employment figures.
Many corporate results publications are also on the menu for the week.
For the moment, the balance sheet of corporate results is mixed, according to Mr. Monot who notes that either the figures are good but slowing down, or companies are doing less well than what analysts expected.
Despite this “the markets hardly sanction these poor performances and in this complacent ecosystem there is a risk that a large capitalization pulls the whole market down” in the event of disappointing figures, estimates this analyst.
Renault and Nissan restructure their partnership
Renault and Nissan confirmed on Monday that the first would reduce its stake in the second to 15% against 43.4% currently, to put the two automakers on an equal footing after months of complex negotiations. This is a major overhaul of the terms of the more than 20-year-old marriage between the two groups. Renault shares lost 4.12% to 36.63 euros.
The results of Elior poorly digested
The action of the collective catering group Elior fell 8.99% to 3.02 euros, after Société Générale lowered its recommendation on the title. Thursday the results of the company were disappointing, Elior published a quarterly turnover and a level of renegotiation of its unprofitable contracts below expectations.