When Wall Street is closed, European stock markets take advantage

After the Cac 40 fell 4.92% last week, the prospect of discord in the National Assembly has prevented investors from buying a real dip. The Paris index rebounded slightly, barely exiting the bear market.

Green Monday for European stock markets

European stocks rebounded slightly on Monday after two weeks marked by strong concerns about global growth. They probably took advantage of being absent from American markets due to a public holiday (celebrating the end of slavery).

London posted the biggest gain of 1.50%, followed by Frankfurt (+1.06%) and Milan (+0.99%).

On the second day of parliamentary elections in France, French President Emmanuel Macron lost his absolute majority in the National Assembly. In Paris, the CAC40 rose slightly (+0.64%).

The results of the French election did not appear to have troubled the markets, with the euro up 0.32% to $1.0533 around 1545 GMT.

The spread between German and French debt also changed little and was below the level of the previous week. But Oanda analyst Craig Erlam noted that the rise in share prices was “little significant loss” over the previous two weeks.

Last week, investors took advantage of the central bank’s announcement of a massive hike in key rates, starting with the Federal Reserve and raising it by 0.75 percentage points.

Concretely, the heavy liquidation that the Paris market has been experiencing since the end of May could lead to some cheap buyouts: mostly individuals were placed on the buy side for 15 days with the hope of repeating the March 8 scenario. to 30, the stock market rebounded more than 10% in 3 weeks.

Recovery hopes were inspired by a weekly drop of more than 5% in Paris (June 12-17) and -8.5% since early June or -17.5% since January 1.

However, fears of a recession are prompting companies to wait and see when it comes to investment and stop hiring workers.

The failure of the presidential party exacerbates the current uncertainty

In the stock market, this defeat of the presidential party is superimposed on many already existing sources of uncertainty, such as the war in Ukraine, inflation, monetary tightening, and the prospect of a recession.

Many major central banks (the Bank of England, the ECB, the SNB, the Federal Reserve, etc.) have raised their key rates to fight inflation.

This weekend, Fed chief Christopher Waller advocated a rapid rate hike, perhaps another 75 basis points in July, to catch up with falling rates and inflation, which peaked at 8.6% in July annually.

Not everyone agrees with this point of view. Esther George, the latest MPC’s only opponent, called for caution, recalling that a large and unexpected hike in the federal funds rate could destabilize businesses and households.

In this context, the intervention of Federal Reserve Chairman Jerome Powell will be closely monitored. He will speak Wednesday and Thursday at the biennial Congressional hearings, first in the Senate and then in the House of Representatives.

In the eurozone, his colleague Christine Lagarde reaffirmed on Monday the ECB’s desire to raise interest rates twice during the summer and avoid a split in the debt markets between countries in the region.

Faced with these various concerns, investors are no longer obsessed with finding real deals after the Cac 40 fell 4.92% last week. The Paris index edged up 0.64% to 5920.09, barely out of a bear market (a bear market synonymous with over 20% drops since its last high on Jan. 5).

The amount of transactions amounted to only 2.83 billion euros, while American investors were not present at the June 19 holiday dedicated to the liberation of African American slaves.