S&P 500 flirts with bear market, fears Fed ‘super raise’, market news

The Paris Stock Exchange is in its fifth consecutive decline, the longest since the end of February, and Wall Street is set to follow suit. Accelerating inflationary pressures suggest an even more aggressive response from central banks in terms of tightening monetary policy, raising recession fears.

Around 14:30, Bedroom 40 fell again by 1.98% to 6,064.89 points after an unprecedented low of 6,033.06 points (5,903.10) since March 8. The volume of business is 1.6 billion euros according to the index values.

Contracts future June US indices fell 2-3.2% after last week they showed the sharpest weekly decline since the end of January. The S&P 500 is on the brink of a bear market after dropping nearly 20% from its January high. Among tech stocks, Alphabet, Apple, Amazon and Microsoft lost between 2% and 4% on the New York floor.

The Fed faces a dilemma

US consumer prices rose 8.6% year on year in May, the highest level since December 1981. The statistics dampened hopes for an approaching peak in inflation and increased pressure on the Federal Reserve in the two days before the decision on monetary policy. Until last Friday, economists typically expected a 50 basis point Fed rate hike announcement on Wednesday, but some, including strategists at Jefferies, are now expecting a 75 basis point hike.

The problem with risky assets is that [la Fed] is faced with a dilemma and we are faced with two wrong choices, sums up Max Keitner, strategist at HSBC, quoted by Bloomberg. For him, or inflation will rise for a long time and central banks will have to do more, hurting valuation and ultimately bad for risky assets. Or, if growth slows more than expected, earnings forecasts will have to be lowered. Since Friday, the path to a soft landing has become even narrower “.

In the bond market, yields on 2-year US bonds, reflecting interest rate expectations, hit 3.2537%, briefly outperforming 10-year yields for the first time since April. This inversion of the curve is generally considered to be a precursor to a recession.

In Europe, German 2-year bond yields hit 1% this morning for the first time in more than 10 years. The price of the 10-year Bund is trading at 1.5960%, while the price of the Italian BTP is heading towards 3.9180%. This is putting pressure on European banks, while the ECB gave no indication last Thursday about the tools it intends to introduce to support so-called periphery bonds in the face of the risk of widening yield spreads. BNP Paribas, Agricultural loan as well as Societe Generale lose almost 4%.

Last Thursday, the European Central Bank signaled that it was preparing to raise its key rate by a quarter of a point in July. Another growth is expected in September, and its value will depend on the new medium-term inflation forecasts. If they were revised upwards, the ECB would have to decide to tighten by 50 basis points.

Uncertainty around Vaccine Candidate Valneva

Political risk is also in people’s minds. 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.

Valneva falls by 21%. The biotech company said late Friday that the European Commission’s advance volume guidance would not be enough to ensure the sustainability of the Covid-19 vaccine program.

Economic-sensitive cyclical and technology stocks are following suit. Renault decrease by 4.8%, fauresia 6.4% Unibile-Rodamco-Westfield by 4.8% and STMicroelectronics by 4.7%.

in luxury LVMX, Kering as well as Hermes fall by 2.6% to 3.3% as the cities of Shanghai and Beijing resumed mass testing in the face of a renewed wave of Covid-19 infections, rekindling fears of new confinement shortly after easing health restrictions began.

Athos drop 10%. Big distrust on the eve of the announcement of its new strategic plan.

against the trend Thales adds 1.5% after the decision of the Australian government to pay 555 million euros to its subsidiary Naval Group as compensation for the violation of a contract related to the supply of 12 submarines. In addition, Goldman Sachs resumed coverage of the stock with a ‘buy’ recommendation with a target of 146 euros.

Elior is inferior to 13.7%. HSBC downgraded the catering group’s rating from Buy to Hold and lowered its price target from €7.50 to €3. Broker claims to perceive ” many execution risks as the company, which is looking for a new CEO, says the pace of recovery is slow.