The Paris Stock Exchange is on track to align a fourth session of decline in a row, the longest series since the beginning of May, the acceleration of inflation in the United States to a new peak of more than 40 years increasing the pressure on the Federal Reserve. Consumer prices rose 1% last month and 8.6% year-on-year, against 0.7% and 8.3% respectively anticipated by the consensus formed by Bloomberg. Excluding food and energy, the increase reached 0.6% over one month and 6% over one year (0.5% and 5.9% estimated).
The surprise acceleration of inflation, in global data, as well as excluding volatile elements, “reinforces the likelihood that the Fed will be forced to extend its tightening series by 50 basis points during the fall, it even opens the way to more marked hikes of 75 basis points during the meetings of the monetary policy committee in the coming weeks warns Michael Pearce of Capital Economics. The Federal Reserve should therefore announce a 50 basis point hike in its interest rates next Wednesday, after a tightening of the same magnitude last month. Investors also fear that tensions in the labor market combined with historically high inflation will prompt the Fed to accelerate the pace of reduction in the size of its balance sheet, which began in early June. The morale of American households is also at its lowest for more than 40 years. According to the first data for the month of June, the consumer confidence index, as calculated by the University of Michigan, fell to 50.2 points, against 58.4 in May and 58 expected by the consensus.
Shortly after 4 p.m., the Bedroom 40 fell 2.7% to 6,189.93 points in a business volume of 2 billion euros. In New York, the Dow Jones loses 2.32% and the Nasdaq Composite 3.06%. Among the “high tech”, Apple loose 2.7% and netflix 5%, as Goldman Sachs downgraded the stock from “neutral” to “sell”.
Return to positive rates for the ECB
On the bond market, the yield on the US 3-year bond hit 3.15%, a level not seen since November 2018. Closer to home, the bonds of the most indebted countries in the euro zone are moving to the highest more than two years in the wake of more offensive than expected comments from the European Central Bank. That of the Italian 10-year BTP came close to 3.68% on Friday and that of the Greek loan of the same maturity touched 4.4%. At the European level, banks show the strongest decline (-4.1%). In Paris, Agricultural credit decrease of 6%, Societe Generale by 5.1% and BNP Paribas by 4.8%.
The ECB will end its asset purchase program at the end of the month before raising its main key rates by a quarter of a point in July, a first in more than 10 years. The central bank significantly raised its inflation forecasts, which points to an upcoming, potentially more marked, tightening in September. It has also significantly lowered its growth forecast for this year. The “hawkish” attitude adopted by the ECB, which comes after the Bank of Australia raised rates by half a point on Tuesday, ” reminds us that inflation comes before growth in the monetary decisions of central banks, reports Emmanuel Cau, strategist at Barclays.