ECB makes money more expensive, stock market fears summer will be ‘very hot’, Market News

It is now certain that this summer the European Central Bank will, in turn, raise its key interest rate to combat inflation, which it predicts will still exceed 2% in 2024. the euro area for more than ten years. At the end of its monetary policy meeting, the ECB’s Governing Council confirmed a halt to asset purchases from next month, the month in which the Frankfurt institution scheduled after the January 21 meeting to announce a 25 basis point increase in its refi rate, which will rise from 0% to 0. 25%. She also hinted that if inflation did not improve by September, she would speed up the rate hike by announcing a 50 basis point hike.

Frédéric Ducrose, head of macroeconomic research at Pictet Wealth Management, tweeted that the key takeaway is that “The ECB has shifted the burden of proof. The outlook for inflation should improve if the ECB does not raise rates by 50 basis points in September. » Second, according to Deutsche Bank strategist Jim Reid, “The ECB is expected to return to consecutive increases of 25 basis points until it reaches a final deposit rate of 2% in mid-summer 2023, although there is a risk of a second increase of 50 basis points before key rates become neutral. »

The prospect of seeing the ECB come out of the zero interest rate policy in a forced march, raising the refinancing rate from 0% to 0.75% in just three months, does not please the stock market. The era of negative deposit rates is also over. in Bedroom 40 lost 1.4% to 6358.46 points. In the secondary debt market, the French 10-year sovereign bond rate broke the 2% mark for the first time in eight years. “Less cash, fewer bond purchases, and higher rates are the perfect cocktail for a very hot summer ahead.”comments Nicolas Forest, head of bond management at Candriam. “The end of quantitative easing poses a clear threat to financial stability. The Italian spread has already widened significantly. Even if the markets are considering creating a structure for spreads, the additional tool has not yet been introduced. Thus, the risk of fragmentation is significant and there is no doubt that the ECB should announce in the coming months the introduction of a new instrument in the coming months. »

War, “high price” for the economy

The ECB revised its inflation forecast upwards. While consumer prices in the euro area reached a record 8.1% for the year in May, the ECB expects inflation to hit 6.8% this year from 5.1% in March before falling to 3.5% in 2023 (revised from 2.1%). ) and up to 2.1% in 2024 (compared to 1.9% previously). As for the GDP growth forecast, it is reduced from 3.7% to 2.8% for this year, from 2.8% to 2.1% for 2023 and increased from 1.6% to 2.1% for 2024 year.

While investors are trying to gauge the scope and pace of the central bank’s upcoming monetary tightening, they are also waiting for May US inflation data to be released tomorrow. According to the consensus formed by Bloomberg, they should have stabilized at 8.3% during the year.

Yesterday, the OECD warned of the risks looming over the global economy, which should “pay a high price” for the war in Ukraine in the form of lower growth, higher inflation and potentially long-term damage to supply chains.

Two options for the nationalization of EDF are being considered

Among the biggest falls in Cac 40, ArcelorMittal dropped over 4% Unibile-Rodamco-Westfield lost 3.5% and Saffron fell by 3%.

Contrary to the trend, EDO scored over 6% on DTH. The nationalization of the electrician is one of the priority projects of the new government, which should be implemented after the legislative elections, the daily newspaper reports. Echo. The state, which owns 84% ​​of the group’s capital, is exploring two options: either through a simplified public offer for minority shareholders, or through a nationalization bill, daily points out.