The Paris Stock Exchange fell sharply in early trading in response to increased tensions in the bond markets. Accelerating US inflation does call for a tough response from the US Federal Reserve on Wednesday, adding to recession fears. The risk is also fueled by the zero Covid policy advocated by China.
At 9:10 am Bedroom 40 lost 1.27% to 6,108.63 points.
The inflation rate reached 8.6% yearly in May across the Atlantic, the highest level since December 1981, causing financial markets to fall on Friday that continued into Asia this morning. Surrounding pessimism was also reinforced by the drop in the University of Michigan consumer confidence index to 50.2, the lowest level since the statistics were created in 1978.
To the inversion of the yield curve?
US bond yields continue to decline, especially those with short maturities. The 2-year rate is trading at 3.1743%, unheard of since 2008, while the 5-year rate is approaching 3.35% compared to 3.1837% for a 10-year loan. This inversion of the curve is generally considered to be a precursor to a recession.
It is logical that all attention is focused on the Fed, which will make a decision on monetary policy on Wednesday. Until last Friday, economists typically expected a 50 basis point Fed rate hike announcement, but some, including strategists at Jefferies, are now expecting a 75 basis point hike. Thus, Jerome Powell will have to choose between high inflation and the risk of a recession as prices are far from peaking.
A fragile majority for Emmanuel Macron
Asian markets were mostly down this morning, with Tokyo, Seoul and Hong Kong down more than 3%, while China’s CSI 300 lost 1.1% at the close. Shanghai and Beijing have resumed their mass testing process in the face of a renewed wave of Covid-19 infections, resurrecting fears of new restrictions shortly after easing medical restrictions began.
In France, the results of the first round of legislative elections show an unstable majority of the coalition formed around President Emmanuel Macron against the New People’s Ecological and Social Union (Nupes), led by Jean-Luc Mélenchon. Together ! according to Opinion Way forecasts, it will collect from 260 to 300 seats, and Nupes – from 170 to 210. The absolute majority is fixed at 289 deputies out of 377 elected.
Uncertainty around Vaccine Candidate Valneva
Valneva falls by 21%. The Panel expressed concern that a supply agreement with the European Commission for an inactivated whole virus vaccine candidate for Covid-19, VLA2001, is under threat due to a lack of sufficient quantities, which could jeopardize the program.
Athos loses 4.3%. The group, which is due to announce a strategic plan on Tuesday, plans to spin off its IT services activities into a separate legal entity, BFM Business told Monday without citing its source.
Total Energy a 1% drop on the back of falling crude oil prices, weighed down by fears of a slowdown in demand amid rising inflation. In addition, Qatar has granted the French oil group a 25% stake in a new joint venture with national company QatarEnergy (75%) to increase its overall liquefied natural gas (LNG) export capacity.
against the trend Thales receives 2.8%. Goldman Sachs has resumed coverage of the stock with a ‘buy’ recommendation with a target of 146 euros. Among other analyst notes, Bernstein noted Orange from “linear performance” to “superior performance”. The share of the telecom operator is 0.5%.