Pre-market signs hinted at an initial rise in Cac 40… But the fall was imposed from the start, becoming more pronounced as the session progressed. The day ended badly, with a sharp fall in Paris, as in all stock markets. Reason? The “poisonous” tone of the US Fed, saying it would be necessary” time control inflation and interest rates federal funds will continue to grow even if this strategy slows growth. On Wednesday evening, the monetary institution, as expected, raised its key rates by 75 basis points, bringing them to a range of 1.50% to 1.75%, the most significant tightening since 1994. Invasion [de l’Ukraine par la Russie, ndrl] and related developments are creating further upward pressure on prices and affecting global economic activity.explains the Fed in its press release. Covid lockdowns in China will exacerbate supply chain tensions. Against this background, Fed Chairman Jerome Powell noted that the issue of raising the rate from 50 to 75 basis points will be discussed at the next meeting in July. In general, the members of the monetary policy committee significantly raised their forecasts for key rates, indicating the rate federal funds 3.4% at the end of the year and about 3.8% at the end of 2023.
The screw turns sequentially
Will these repeated tightenings affect economic growth? The risk is high. And the Fed agrees to accept it. The institution also cut its 2022 growth forecast from 2.8% to 1.7%, while raising its inflation forecast from 4.3% to 5.2%. It also provides for an increase in the unemployment rate, which will reach 4.1% in 2024.” This forecast does not yet reflect a recession, but the sudden application of monetary brakes by the Fed will be difficult for the economy.emphasizes Christian Scherrmann, US economist at DWS.
The Fed is not alone in being more aggressive. On Thursday morning, the Swiss National Bank announced a surprise hike of 50 basis points to -0.25% in its main interest rate for the first time since 2007, and indicated that other measures may be needed later. The Bank of England, which made a copy at 13:00, raised its key rate by 25 basis points to 1.25%. It remains to be seen what the Bank of Japan will do. It will operate on Friday.
In the stock market, investors are very wary of these announcements. In Paris Bedroom 40 experienced its seventh session of decline in eight days, falling 2.39% to 5,886.24 points on a trading volume of 3.6 billion euros. in Frankfurt, Dax fell by 3.1%, FTSE Eb 3% in Milan. across the Atlantic Dow Jones, S&P500 and NASDAQ Composite the yield is between 2.1% and 3.5%, and the 30 industrial index even fell below the symbolic threshold of 30,000 points for the first time in more than a year.
In the bond market, interest rates rose before moving in the opposite direction. Thus, the yield on 10-year Treasury bonds peaked at 3.491%, rising to 3.3912 2-years. In Europe, the yield on Italian 10-year bonds flirted with 4% before returning to 3.75% at the end of the European session. The spread with German bonds of the same maturity is 2.1%.
water in gas
In terms of values, cyclical factors and technology suffered one of the sharpest declines in Cac 40, such as Saint-Gobain (-6.53%), ArcelorMittal (-5.45%) and STMicroelectronics (-6.19%).
In addition to the flagship index, Angie melted by 7.29%. The energy company noted a drop in gas supplies after the new export restrictions adopted by Moscow, adding, however, that this did not affect the group’s consumers.
Ipsen lost 3.68%. Morgan Stanley has lowered its target price for a pharmaceutical group name from €90 to €80, while maintaining its “lack of performance” view.
Vice versa, euronext rose 1.54% after JPMorgan raised its recommendation on the trading platform from “neutral” to “best” to 101 euros.