The Cac 40 is experiencing a new “red” session on Monday, extending its decline of 1.68% from Friday. If Wall Street fell even more heavily at the end of the week (-3% for the Dow Jones and nearly 4% loss for the Nasdaq Composite), no rebound is expected on the other side of the Atlantic, with future contracts on major indices suggesting further declines of 0.8% to 1.1%.
In Paris, the flagship index slipped another 1.86%, to 6,157.53 points, in a meager trading volume of 700 million euros. Growth and technology stocks are the most affected in Paris, like Teleperformance (-3.2%), Capgemini (-2.6%) and Dassault Systems (-2.2%), Kering (-2.8%) and LVMH (-1.4%), but also some large manufacturers such as Great (-3.2%), Veolia Environment (-2.8%) and Schneider Electrical (-2.6%). Engie lost 4% in the wake of the relapse in gas prices, while the German economy ministry indicated this weekend that stocks were rebuilding faster than expected.
He is ” Gone are the days when we could count on a stock market rally backed by Powell “, summarized this morning Ipek Ozkardeskaya, at Swissquote. In his address to Jackson Hole on Friday, Fed Chairman Jerome Powell was sharp and to the point: “ His message was crystal clear: inflation must come down even if it means pain for households and businesses “.
Surprisingly resilient employment
In other words, expect key rate hikes to continue, and in movements whose magnitude should remain strong. During the next session in September, the monetary policy committee could thus opt for a further tightening of 75 basis points. It would be the third in a row. Especially since Jerome Powell also mentioned how surprisingly resilient the US job market is. He thus hinted that the Fed could be tolerant of some deterioration in the employment figures. It is this Friday that the statistics relating to the labor market for the month of August will be unveiled.
On the stock market, the pressure also comes from Europe, where representatives of the ECB also made their offensive remarks on Friday in Wyoming. Both Isabel Schnabel and François Villeroy de Galhau have declared themselves in favor of a sharp rise in interest rates in September, in the face of still very high inflation which could undermine the central bank’s credibility in the fight against soaring prices. .
75 basis points on September 8?
The ECB raised interest rates in July for the first time in 11 years, raising its deposit rate by 50 basis points to zero, as inflation fears outweighed risks of a degradation of the economic environment. The scenario of a similar or even higher rate hike of 75 basis points as in the United States now seems to be on the table for the September 8 meeting. ” We need to be able to discuss both 50 and 75 basis points as possible hikessaid Marins Kazaks, another member of the Board of Governors. From the current perspective, it should be at least 50 “. The neutral rate is evaluated at 1.5% in the euro zone by the central bank. It should be reached at the end of the year according to Villeroy de Galhau and at the beginning of 2023 according to Kazaks.
The agenda is empty meeting likely to influence the market on Monday. We are only awaiting the results of the Dallas Federal Reserve survey for the month of August, at 4:30 p.m. Serious things will begin tomorrow, with German inflation figures for August. It should have increased by another 0.3 point, to 8.8% over one year in harmonized data from the European Union.