“Whew” of relief on the stock market after lower than expected inflation in the United States

It’s a “phew” of relief for the markets. In July, the inflation figures, unveiled at 2:30 p.m. and which were so awaited by operators, turned out to be lower than expected by the consensus, which immediately caused a reaction to the rise of the major indices, in the hope to see the Fed be a little less aggressive on its key rates during its next session in September.

In July, consumer prices remained stable over one month, less than the 0.2% rise that analysts had anticipated. Over one year, inflation only comes out at 8.5%, against 8.7% expected and to be compared with 9.1% in June. Same observation in “core” data, that is to say excluding volatile elements such as food and energy. Prices rose 5.9%, still year on year, while a surge to 6.1% was feared.

Photo credit: Bloomberg

After energy, food?

Around 4 p.m., the Cac 40 gained 0.67% after being stable throughout the morning. In New York, the Dow Jones rose 1.58% and the Nasdaq Composite, whose “tech” and growth stocks are the most sensitive to interest rate increases, climbed 2.35%.

Consumer prices remained unchanged in July and there is a good chance that prices will fall squarely in Augustcomments Paul Ashworth of Capital Economics. Gasoline prices fell 7.7% month on month, and with the price of crude oil continuing to fall, they are on track to fall even further, by 11%, in August. Food prices rose 1.1% last month, extending a series of very strong increases, but this is the next deflationary decline. »

A little respite for the Fed?

The analysis office continues: All in all, with headline inflation still at 8.5% and core inflation at 5.9%, it’s still not the significant drop in inflation that the Fed is looking for. But it’s a start and we expect to see stronger signs of easing price pressures over the coming months. »

The reaction was also immediate, also on the futures markets Fed-funds, as calculated by the CME, which now only anticipates at 38.5% the prospect of seeing the Federal Reserve raise its rates by 75 basis points in September, against nearly 70% this morning. A turn of the screw of 50 basis points is now more expected, with a probability of 61.5%.

Photo credits: CME

Sanofi once again a red lantern

The market seems to be reassured by the fact that we have apparently passed the peak of inflation and should continue to see declines in the second halfjudge Brian Price, of the management company Commonwealth Financial Network, interviewed by CNBC. It looks like the odds of another 75 basis point hike by the Fed have diminished significantly following this report and we might only see a 50 basis point hike at the next meeting. If energy prices continue to fall, I expect inflationary data to subside in the coming months. »

These inflation figures in the United States were, of course, the highlight of the session, relegating to the background corporate news, which was very weak. Biggest increase in the Cac 40, Alstom gained 6%. Conversely, that Sanofi loses more than 4%, still weighed down by the cessation of recruitment for trials of its drug tolebrutinib in certain multiple sclerosis and by a deterioration of UBS analysts, who have gone on sale.

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