SSuddenly, the mood changed, and Wall Street, which was in the green, took a serious turn. On Thursday April 4, the three indices ended in the red by more than 1%: the Dow Jones lost 1.35%, the S&P 500 which represents large companies 1.23% and the technology-rich Nasdaq 1.4%. . Nothing serious will say the layman, while these indices are close to their records, with a respective increase of 17%, 27% and 34% over one year. But on closer inspection, the session looked like one of those trend-breaking days, with its flood of bad news.
It was first of all the fear of an Iranian response against Israel after the bombing of its consulate in Syria which made the markets nervous. A barrel of Texan oil jumped from 85 dollars (around 78 euros) to 87 dollars in the afternoon. It is approaching the level of 93 dollars which it had reached very briefly after the Hamas attack in October 2023.
As the conflict remained confined to Gaza, crude oil fell below $70 in December. The increase is therefore powerful, of around 25% over the past four months, accentuated by the production restrictions of the exporting countries united within OPEC. Even raw materials have started to rise again, with some believing that the worst is over in China.
Pessimistic diagnosis
This tension on crude fuels another on inflation. The rise in oil has had an impact on gasoline prices, up 15% since the start of the year. Overall, the latest American figures in this area are bad. Household consumer prices, published at the end of March, increased by 2.5% over one year and by 2.8% if we exclude energy and food. They are no longer falling, and remain well beyond the 2% objective set by the Fed, the American Federal Reserve.
Jason Furman, economist at Harvard and undisputed expert in the field, compiled the various data over three months, and his diagnosis is pessimistic: inflation is now 3.1% over three months compared to 2.6% a month ago . The risk of a backlash, like that experienced several times in the 1970s after the oil crises but also in the 1980s, cannot be ruled out.
As a result, the financial markets which were counting on three, even four, rate cuts from the Fed this year are now hoping for one or two. Some investors are even betting on a status quo with key rates maintained above 5.25%. We are a long way from the optimism that prevailed in December, when the markets were hoping for a first decline in March. Result: long-term rates, defined by the markets, have tightened: certainly, they have not crossed the 5% mark reached in October, but they have increased gradually from 3.9% in December to 4.4 % in March. However, they fell this Thursday to 4.3%, as capital takes refuge in the dollar in the event of an international crisis and investors demand lower remuneration.
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