The control room of Euronext, the company that manages the Paris Stock Exchange (AFP / Eric PIERMONT)
The Paris Stock Exchange rebounded on Wednesday, reassured by statements from the European Central Bank (ECB) after a surprise meeting on borrowing conditions in the euro zone.
The CAC 40 index recovered 1.35% to 6,030.13 points after six sessions of decline.
The ECB instructed its teams to “accelerate” the design of a new “anti-fragmentation” instrument to fight against too wide a spread in rates between countries in the North and countries in the South of the euro zone.
The institution also promised to apply “some flexibility in the reinvestment” of the bonds held under its emergency program launched during the pandemic (PEPP).
These announcements, made at the end of an exceptional meeting of its Governing Council, “reassured the market because it means that the ECB aims to fight against inflation but that it takes into account what it is happening on the financial market and in particular borrowing rates”, comments Ilana Azuelos-Bossard, deputy director at Kiplink Finance.
“The ECB is worried about the rise in borrowing rates, especially those of the most indebted countries, such as Italy,” adds Ilana Azuelos-Bossard.
Indeed the bond market has been very tense for several days.
In one week, the rate of the French ten-year debt had risen from 1.8% to 2.4% on Tuesday and that of the Italian debt jumped at the same time from 3.4% to 4.18%.
Same trend on the side of the “spread”, the difference between the rate of a country and that of another referring country, in this case Germany for Europe, which have clearly increased.
This suggested that “the specter of a fragmentation of euro zone rates seems to be becoming clearer,” said the Kiplink Finance analyst.
Interest rates fell sharply after the ECB’s statements on Wednesday.
At the same time, investors are still awaiting monetary tightening announcements from the US Federal Reserve (Fed) in the evening.
The option of a 50 basis point rate hike has not completely disappeared from the radar but the assumption of a 75 basis point or even 100 point hike has swelled in recent days after the publication of acceleration in consumer price inflation in the United States in May.