(BFM Exchange) – The Paris Stock Exchange continues to drop to new lows throughout the day that threaten even the symbolic threshold of 6,000 points. This Monday evening, CAC 40 fell another 2.67%, its biggest drop since May 9, after signing its worst week since the invasion of Ukraine. Since the beginning of the year, the tricolor flagship index has thus fallen by more than 15%.
And after the first warning at the beginning of May, a new wave of panic is spreading in the stock market. The CAC 40 thus closed Monday at -6,022.32 points -2.67% on an expanded trading volume of 4.36 billion euros. The Paris star index hadn’t dropped like this since May 9 (-2.75%) after signing its worst week since the invasion of Ukraine. The more inflation rises, the more central banks will have to curtail lending, with the risk of further exacerbating the economy already threatened by geopolitical crises.
The capitulation movement took all European markets, with Frankfurt losing 2.23%, London 1.53%, Milan 2.76% and the European benchmark index Eurostoxx 50 2.33%. At the same time, risk aversion swept American indices. On Wall Street, the Nasdaq accelerated its decline and fell 3.90% during the European close, while the Dow Jones and S&P 500 lost 2.38%. S&P has once again entered a bear market, meaning the index has lost more than 20% from its January peak.
On the cryptocurrency side, bitcoin is having a Black Monday. The cryptocurrency queen’s price has dropped below $24,000, a level she hasn’t seen since December 2020. The crypto market as a whole has fallen below the symbolic threshold of $1,000 billion in capitalization.
Inflation and rising interest rates plunged markets into panic
This panic in the markets is symptomatic of investors’ fears about the Herculean task that central banks are only beginning to tackle after years of generous policy support. The “fear index” VIX, which measures market volatility, rose 23% to 34.16. On Friday, the consumer price index in the United States revealed further acceleration to +8.6% in-a-year inflation in May, once again surprising the consensus consensus of forecasts, prompting investors to further reassess their long-term expectations. The monthly survey from the University of Michigan, also released on Friday, pointed to a deterioration in consumer confidence in June… slumping to a 70-year low.
However, central banks are just starting to tighten their policies: the United States Federal Reserve tightened its rates in March and then to 1% in May, which means there’s still significant potential before it reaches a truly restrictive level (the actual rate is still It is largely negative because it is well below inflation). The American financier will set the tone for future monetary policy on Tuesday and Wednesday. A half-point rate hike has already been priced in by investors. However, the hypothesis of a drier spin of the 0.75 percentage point screw in the key ratio is not excluded, which may constitute an unprecedented decision since 1994.
As for the European Central Bank, it was only last week that it officially announced its first rate hike (for next month). In Europe outside the EU, it was British GDP that disappointed this morning, shrinking 0.3% in April instead of the slight increase expected, while the Bank of England will hold its meeting this week.
Concretely, tightening monetary policy is pushing bond yields to levels not seen in 11 years, with the 10-year US Treasuries rising to 3.29%, while the German Bund of the same maturity stays at 1.569%. It marks a peak since 2014, just as the French 10-year bond hovers at 2.23% or the Italian debt, whose 10-year yield has soared to 4.40%. An increase in bond yields that mechanically lowers the relative interest rate on a stock investment.
Valneva is in trouble
Biotech Valneva has slumped to its lowest level in more than a year and a half as the giant European Union order looks set to collapse completely.
On the eve of the presentation of the group’s new strategic plan, which should announce the split of its IT services division, BFM Business reveals that Atos has dropped by nearly 11%.
Elior marks the biggest drop in SBF 120 (-18.31%) on Monday and is penalized by an analyst downgrade. The market doubts the mass caterer’s capacity to raise the bar at increasing rates in a context of hyperinflation.
Thales is resisting
Among the rare increases, Thales (+2.10%) benefits from the possibility of receiving €555m in compensation after the Australian government breached the delivery agreement by 12 submarines, Danone, Carrefour and Orange, scoring a few points due to their defensive nature. from its activities. Out of its flagship index, Pizzorno Environnement gained 3.79% after winning waste collection contracts for 61 municipalities in the Lille metropolitan area over the next seven years.
On the currency side, the dollar enjoys its status as the world’s reserve currency and the euro fell 0.59% to $1.0428, the lowest in more than a month.
Energy prices fell 1.05% to $120.65 a barrel for Brent and $119.26 for WTI, down 1.05%, amid fears that a worsening economy will curb demand. In addition, this scenario is getting worse in light of the latest news from the health front, as China struggled to replenish its stocks ahead of a wider reopening in June last month.
Sabrina Sadgui – ©2022 BFM Exchange