“ECB created volatility, not a trend”. Economist Christian Parisot’s commentary for analyst firm Aurel BGC is dated Friday morning but is still relevant today. This Monday, four days after the European Central Bank buried forward guide and raised key stakes by 50 basis points in exchange for the hawks agreeing to implement – made urgent by the political crisis in Italy – an anti-fragmentation tool (an announcement that was initially welcome while a long list of conditions are being announced). Bedroom 40 closed the session with a slight gain of 0.33% to 6,237.55 points after losing about 0.6% this morning.
“The feeling has become incredibly changeable” in recent weeks, says Neil Birrell, chief investment officer at London-based wealth management firm Premier Mitton Investors. “The bad news can be perceived – attention, acrobatics in logic – like good news According to him. Given the deterioration in activity, whether in industry or services, and given the deterioration in demand due to the sharp rise in prices, the stock market may be hoping that the central banks of the big banks will be less unleashed in their tightening of monetary policy.
In a world caught unawares by high inflation, a sort of Fifth Horseman of the Apocalypse that central banks are fighting and, acknowledging their procrastination, they are determined to regain dominance by raising interest rates at full speed. +0.5 percentage point all at once for the ECB, unprecedented since the inception of the euro, and for the Fed, the 75-point increase in June has not been seen since 1994), even if it means the economy is plunging into recession, Hope that the potentially worst is behind us seems to be a sufficient drive for a small risk return in the stock market. And in the end, if the US central bank doesn’t go too far in raising rates, a recession could eventually be avoided, according to former Fed chair turned US Treasury Secretary Janet Yellen.
“The Federal Reserve (Fed) is expected to raise rates sharply again. (+0.75 points, in the range of 2.25-2.5%) at its meeting ended on Wednesday, July 27.says Thomas Kosterg, an economist at Pictet Wealth Management, is in line with market expectations, although some are expecting a 100 basis point increase. “Despite the fact that the latest inflation data again surprised for the better, no one at the Fed seems to want to increase the speed.”, says Bruno Cavalier, chief economist at private bank Oddo BHF. And after ? “In the context of the general deterioration of the economy, which we already see in GDP figures and in polls like ISM [auprès des directeurs d’achats]we expect the Fed to slow its pace of rate hikes to 25 basis points at its next meeting in September and beyond.”Thomas Kosterg says. This is indeed the most important question for the stock market: what will the Fed do in September (there will be no monetary policy committee meeting in August) and beyond? The market is currently estimating a 50bp upside potential. in the fall just over 60%, while the implied probability of a 75 bp increase is only 34%.
“While last week was mainly focused on Europe (gas, Italy and the ECB), this week is mainly about the United States. [comité de politique monétaire de la Fed] which ends on Wednesdayannounced this morning as a warning against a week that could be volatile again, by Jim Reed, strategist at Deutsche Bank. “Unless we hear otherwise in the paper [étant donné que les forward guidances ont disparu, des deux côtés de l’Atlantique, les banques centrales ont pris l’habitude ces derniers temps de guider les anticipations à la dernière minute par voie de presse], Expected that [la Fed] raises rates by 75 basis points.”followed by two increases of 50 basis points in September and November and one increase of 25 basis points in December. “There will be no new economic forecasts at this meeting, so the focus will be on how the Fed is leading us into a world where no one should trust central bank forecasts anymore because they have proven to be very unreliable. […]. However, the market will continue to absorb clues as to whether the committee is leaning towards 50 or 75 for September. »
By September, central bankers, as well as investors, will see two new inflation reports, figures for August and September. The Fed will legally wait to see the situation more clearly before making a decision. Meanwhile, new data on the direction of prices in Germany and, in general, in the eurozone, as well as data on US GDP for the second quarter, will be published at the end of the week this week. The Atlanta Fed’s GDP now portends a 1.6% year-on-year contraction, driven by a negative contribution from inventories. “unsustainable and difficult to assess componentwe explain at Oddo BHF. Real GDP had already fallen in the first quarter, this time due to foreign trade. By a common but dubious definition, the United States would have been in recession in the first half of the year… A curious recession as employment, income and spending continued to rise. The weakening of the US economy is undeniable, but until June it was not strong enough to cause a reversal in the labor market and, alas, reduce inflation. »
Many other economic indicators will be released this week, such as the latest US durable goods spending data or consumer confidence data, and a large number of companies will release their second quarter reports. And Vincent Blois, market analyst at broker IG France, cataloged: “Tuesday, Microsoft, Alphabet, Visa, LVMH, Coca-Cola, McDonald’s, General Electric, Dassault Systèmes and Remy Cointreau. On Wednesday, markets will target Meta, Qualcomm, T-Mobil, Rio Tinto, Boieng, ADP, Airbus, Kering, Daimler, Ford Motor, Danone, Saint Gobain, Carrefour, Wordline, Eramet, Vallourec, Atos, Fnac Darty. On Thursday, we analyze first six months results from Amazon, Apple, Mastercard, Nestlé, Pfizer, L’Oréal, Shell, Intel, TotalEnergies, Sanofi, Volkswagen, Air Liquide, Safran, EDF, Stellantis, STMicroelectronics, Orange, Vivendi and Accor before watching Exxon Mobil, Chevron, Hermès, BNP Paribas, Vinci and Engie on Friday. » In total, 175 S&P 500 companies in the US must make their quarterly copy, which is more than a third of the total.
Faced with program density this week, it is time to be cautious on the Paris Stock Exchange today, as investors also remembered that last week President Putin threatened to halve Russian gas flows to Europe (via the Nord Stream 1 gas pipeline) further. by just 20% capacity compared to 40% currently) if the turbine, which was refurbished in Canada, did not return earlier this week.
Trading volumes on the Cac 40 are extremely low, not even breaking the 2.5 billion euro mark today.