The control room of Euronext, the company that manages the Paris Stock Exchange (AFP/Archives/ERIC PIERMONT)
The Paris Stock Exchange sank by more than 2% on Monday, faced with the spectacular surge in bond yields against the backdrop of galloping inflation in the United States which raises fears of an amplification of monetary tightening in the coming months.
The star CAC 40 index lost 2.67% to 6,022.32 points. It was still at 6,548.78 points at the close on Whit Monday.
After the resurgence of inflation in the United States in May, investors fear that the US Federal Reserve will have an even heavier hand than expected so far in terms of monetary tightening.
They will have their eyes glued to the announcements that will be made at the end of the meeting of the committee responsible for monetary policy, which is held on Tuesday and Wednesday. An increase in its key rates by half a percentage point, or 50 basis points, seems certain, but now the markets are worried about a possible higher increase, of 75 basis points.
“With the risk of inflation, what is at stake is the risk of recession by too rapid a phenomenon of rate hikes which would annihilate the resumption of growth”, underlines Daniel Larrouturou, equity manager of Dôm Finance.
This risk was reflected in the surge in bond rates to “critical levels which take the markets by surprise”: “we expected a rise, but certainly not as fast and brutal”, recognizes the expert.
Italian debt thus saw its 10-year yield exceed 4%, the French borrowing rate for the same maturity exceeded 2% and the German Bund stood at 1.63%, a level not seen since 2014.
“The overall effect of rising rates is still very unfavorable to the equity market,” said Mr. Larrouturou, adding that it was also linked to the end of debt purchases planned for July by the European Central Bank.
On the values front, no sector was spared apart from a handful of survivors like Thales, whose share price gained 2.10% to 114 euros, while Goldman Sachs anticipates, according to Bloomberg, a period of defense spending. not seen since the 1980s in Europe.
Banks saw Friday’s pullback deepen and fell significantly more than the market.
The most defensive stocks like Danone (+1.08% to 53.22 euros), Pernod Ricard (+0.06% to 174.90 euros) and Orange (+0.91% to 10.90 euros) escaped in the doldrums.
© 2022 AFP
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