Exit the rebound of the day before on the Paris Stock Exchange, completely erased in the first hour of listing. While the market has taken note of the expected 75 basis point rise in Fed interest rates, the largest since 1994, it fears that the central bank’s fight against inflation will end up weakening the economy, and hence business results.
At 10:15 a.m., the Bedroom 40 lost 1.54% to 5,936.99 points in a business volume of 520 million euros.
Investors also fear a contagion of monetary policy tightening by central banks. The Swiss National Bank announced this morning a surprise hike of 50 basis points in its main interest rate to -0.25% and indicated that further increases may be necessary thereafter. The Bank of England will deliver its copy at 1 p.m. and the market, which had until then expected a rise of a quarter of a percentage point to 1.25%, is now leaning on 50 basis points, even 75, in the wake of its American counterpart.
Towards an increase of 75 points in July?
The Fed’s gesture was widely anticipated by the markets since the announcement last Friday of an acceleration in the rise in consumer prices to 8.6% over one year, a level not seen since December 1981, especially since five-year inflation expectations recorded by the University of Michigan survey came out at their highest since June 2008.
The rate of Fed-funds is now in a range of 1.5% to 1.75% and the central bank plans further hikes this year, but its chairman Jerome Powell has indicated that deep tightening will not become the norm in the next few months. monetary policy committee meetings. He nevertheless hinted at a 50 to 75 basis point hike in July and said he was confident in the Fed’s ability to control inflation, while conceding that this ” will take time “.
Yields are on the rise again
The Federal Reserve estimates that the federal funds rate should be at 3.4% at the end of the year, against 1.9% estimated in March, and at 3.8% in 2023, according to the famous “dot plot”. », dot chart illustrating the expectations of the members of the monetary policy committee. Finally, the growth forecast was lowered from 2.8% to 1.7% for 2022, while that concerning inflation was raised from 4.3% to 5.2%.
On the bond market, the yield on the Italian 10-year bond tightened by 3 basis points to 3.8510% after having fallen the day before in anticipation of the creation by the ECB of an anti-fragmentation tool, which should be presented in July. The spread with the German Bund of the same maturity is 2.12%.
The yield on the 2-year US bond, which reflects inflation expectations, climbed 10 basis points to 3.2945% this morning, and that of the 10-year maturity by 8 basis points to 3 .36%.
Engie notes a drop in gas deliveries
Engie loose 5.6%. The energy company said it had seen a drop in gas deliveries after the new restrictions on exports decided by Moscow, adding however that the group’s customers were not affected by the situation.
Cyclical and technological stocks show the strongest declines, such as Saint Gobain (-4%), ArcelorMittal (-3.4%) and STMicroelectronics (3%).
Ipsen loses 2.8%. Morgan Stanley lowered its target price on the title of the pharmaceutical group from 90 to 80 euros, maintaining its opinion of “underperformance”.
Conversely, Euronext increased by 3.2%. JPMorgan raised its recommendation on the stock market platform from “neutral” to “outperformance” to target 101 euros.
Rexel progresses takes 0.6%. The distributor of electrical equipment raised its objectives for 2022 and presented its forecasts for the period 2022-2025 before holding a day dedicated to investors from 1 p.m.