The control room of Euronext, the company that manages the Paris Stock Exchange (AFP / ERIC PIERMONT)
The Paris Stock Exchange ended the session sharply down 1.40% on Tuesday and below 8,000 points, with investors estimating that the first rate cut from the Federal Reserve (Fed) could take longer than expected.
The flagship CAC 40 index dropped 112.50 points to 7,932.61 points, falling below the symbolic threshold of 8,000 points at closing for the first time since March 6. On Monday, the index closed up 0.43% at 8,045.11 points.
“The main reason” for this drop is “above all the very good retail sales data in the United States” published the day before “which lead the market to once again revise the forecasts of rate cuts by the American central bank” (Fed ), comments Charlotte de Montpellier, economist at ING.
This publication “hit the nail on the head” after a US inflation indicator (CPI) last week surprised the market higher for the third month in a row, as well as strong US employment figures in the first quarter, explains the economist.
“In this context, no one can envisage the Fed reducing its short-term rates and this is what is very poorly digested by the market,” underlines Charlotte from Montpellier.
The Fed, which is maintaining its key rates at their highest level in more than 20 years with the objective of reducing inflation to 2%, has signaled that it is planning three cuts in 2024, but this scenario is increasingly weakened by the resilience of the American economy.
The market now even doubts that there will be more than one rate cut during the year and “there are more and more fears that there will not even be one at all”, underlines Charlotte from Montpellier .
“In addition to this main element, geopolitics is the additional element which brings volatility” to the session, adds the economist.
On Tuesday, the chief economist of the International Monetary Fund (IMF) estimated that the rise in tensions in the Middle East, after the massive firing of drones, ballistic missiles and cruise missiles by Iran towards Israel, could delay the return inflation towards its target.
“Iran is a major oil producer and there could be questions about supply, which would contribute to increasing the price” of black gold and thus fuel inflationary pressures, detailed Charlotte de Montpellier.
Stellantis sanctioned
Stellantis fell 2.90% to 24.26 euros after shareholders validated the controversial remuneration of its general director Carlos Tavares – which could reach 36.5 million euros for the year 2023 -, during the general meeting of the automobile group in Amsterdam.
This remuneration includes in particular the payment of a bonus of ten million euros for the “transformation” of the group created in 2021 with the merger of PSA and Fiat-Chrysler.
Euronext CAC40