CAC 40: Size of fight against future inflation makes markets panic, CAC 40 falls

(BFM Bourse) – A risk-aversion trend swept the Paris Stock Exchange and its European counterparts Monday morning after a stronger-than-expected rise in price level in the United States. The more inflation rises, the more central banks will have to curtail credit, with the risk of further exacerbating the economy already threatened by geopolitical crises.

The drop reached -2% for the main European markets on Monday morning, a symptom of the panic of investors who realized the herculean scale of the task central banks are beginning to tackle after years of generous policies. 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. After signing its worst week since the invasion of Ukraine, where Dax and FTSE MIB lost 2.1% and Ibex 1.8%, the CAC 40 thus fell 2.23% to 6,049.21 around 11:30 am.

Concretely, this is pushing bond yields to levels not seen in years – 2018, with the 10-year US Treasury yield at 3.25%, marking a peak since 2014 with the German Bund of the same maturity at 1,569%. An increase that mechanically lowers the relative interest of an equity investment.

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). As for the European Central Bank, it was only last week that it officially announced its first rate hike (for next month). Conclusion: The markets are far from over.

UK GDP shrinks

Worse still, China, where the vaccination rate remains low, is still battling the Covid epidemic, with the threat of a new outbreak in Beijing just days after the cautious reopening of public places. “Efforts to prevent and control this epidemic associated with bars in Beijing are more difficult than the wave of epidemics that occurred in the Xinfadi market in June 2020,” a spokesperson for the Beijing (Beijing) municipality said on Sunday. Said. This outbreak from June to August 2020, linked to the Xinfadi wholesale market, was one of the biggest outbreaks the Chinese capital has ever experienced. “Beijing will continue with dynamic and precise measures to adapt to the epidemic, rather than shutting down all public places, as was the case in most regions during the previous “static administration,” although reassured infectious respiratory disease specialist.

In Europe outside the EU, it was the British GDP that was disappointed this morning, shrinking 0.3% instead of the slight increase expected in April, while the Bank of England will also hold its meeting this week.

In France, the risk of the presidential party losing an absolute majority in the National Assembly increases the pressure by penalizing the car or bank, while the rise in bond yields is pushing tech stocks down.

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 division of its IT services division, BFM Business reveals that Atos fell 10%.

Thales is resisting

Among the rare increases, Thales (+2%) capitalizes on the possibility of receiving 555m euros in compensation after the Australian government broke the deal for the delivery of 12 submarines, with Carrefour and Orange scoring a few points due to the nature of their defences. activity. Out of its flagship index, Pizzorno Environnement gained 1.2% 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 0.36% to $1.0479, the lowest in more than a month.

Energy prices fell 1.53% to $120.14 a barrel for Brent and slid 1.63% to $118.70 for WTI, 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.

Guillaume Bayre – ©2022 BFM Exchange