The just ended semester made history as the third worst first semester of Cac 40 (-17.2% vs. -17.43% in the first half of 2020 and -21% at the end of June 2008). Today, the index lost 1.8% to 5922.86 points, almost 20% below the record high in early January. For those still wondering if the Cac 40’s sharp 3% rise on Friday should be attributed to what the stock market calls a “dead cat bounce”, i.e. a bear market rebound. , today there is their answer.
Recession worries have further intensified in recent days in light of the latest data released and yesterday’s confirmed determination by central banks to raise interest rates despite recession risks. Investors are scared “that continued rate hikes to fight inflation will not end up leading to a recession, and that theme continued yesterday, Fed Chair Powell, ECB President Ms Lagarde and Bank of England Governor Bailey reaffirmed their intention to bring inflation back to target levels during a panel on ECB forum, explains Jim Reid, strategist at Deutsche Bank. Until Wednesday evening, the annual European Central Bank Symposium was taking place in Sintra, Portugal.
Inflation hits new stock market record
Yesterday, US central banker Jerome Powell acknowledged that there is a risk that the Fed could go too far in raising rates, resulting in a more than desirable cooling in economic activity, but this risk is not the most important. In the worst case scenario for the economy, the central bank will not be able to restore price stability.
Jerome Powell and Christine Lagarde also warned yesterday about the heightened risks associated with inflation, which promises to be persistently high, thus preparing investors for difficult times. ” sick “. In France, consumer price growth hit a new record this month, at 6.5% yoy in pre-harmonized data from the European Union, allowing comparisons to be made with other countries. While Germany enjoyed a temporary respite from inflation, according to data released yesterday (thanks to two government measures: lowering the fuel tax and introducing a concessionary ticket), inflation statistics for the eurozone as a whole, which will be released tomorrow, should also reach new highs ( by 8.5% for the year, according to Bloomberg consensus economists). In Spain, data released yesterday showed that harmonized inflation reached 10% this month (+1.5 points compared to May).
Energy dependence on Russia is one of the main reasons for the inflationary shock in Europe. Today’s contract price forward one month of gas for the European benchmark (Rotterdam Stock Exchange) returned to their extraordinary three-month-old levels of more than 149 euros per megawatt-hour (nearly +8%), after rising more than 6% yesterday after a compressor failure at the Norwegian Martin Linge field, which led to a reduction in production, in an already difficult situation with supplies, with Russia reducing its supplies in response to sanctions. German gas and electricity supplier Uniper (-14% on the Frankfurt Stock Exchange) said today that it has received only 40% of the gas volumes agreed under the contract with Gazprom. This situation forces the group, which is in a difficult position, to purchase at inflated prices the capacity it needs to supply its customers.
Banks tested for recession
The European Central Bank is expected to raise interest rates in July for the first time in eleven years. While a recession is not the main scenario for the ECB, the banking supervisory authority responsible for bank soundness nevertheless announced today that commercial banks will have to take this risk into account when calculating their soundness. A bank that is too fragile will not be able to pay dividends. Societe Generalethe most fragile of the French banks, fell more than 6%.
In general, the most sensitive to the state of the economy are the companies that suffer the most in the stock market. Renault fell again by almost 3%. Those with large debts such as Alstom (-8%) also fell.