The Paris Stock Exchange fell for the fifth session in a row, weighed down by the intensification of tensions in the bond markets. The acceleration of inflation in UNITED STATES indeed calls for a strong response from the US Federal Reserve on Wednesday, heightening recession fears. A risk also fueled by the zero Covid policy advocated by the China.
Shortly before 10 a.m., the Bedroom 40 fall of 2% to 6,061.54 points in a business volume of 520 million euros.
The inflation rate reached 8.6% over one year in May across the Atlantic, its highest level since December 1981, causing a fall in the financial markets on Friday, which continues this morning. The ambient pessimism was also reinforced by the fall of the consumer confidence index of the University of Michigan to 50.2 points, its lowest level since the creation of the statistic, in 1978.
Towards an inversion of the curve?
Yields on US bonds continue to tighten, especially at short maturities. That of the 2 years is traded at 3.1910%, unheard of since 2008, while that of the 5-year maturity exceeds 3.36%, against 3.2270% for the 10-year loan. This inversion of the curve is generally considered to be the harbinger of a recession.
Eyes are logically turned towards the Fed, which will make its monetary policy decision on Wednesday. Until last Friday, economists generally expected the announcement of a 50 basis point hike in the Fed funds rate, but some, including strategists at Jefferies, are now anticipating a 75 basis point hike. Jerome Powell will therefore have to decide between high inflation and the risk of a recession insofar as the surge in prices is far from having reached its peak. The market is also awaiting, on Friday, the inflation figures in eurozone.
A fragile majority for Emmanuel Macron
In France, the results of the first round of the legislative elections suggest a fragile majority for the coalition formed around President Emmanuel Macron against the New Popular Ecologist and Social Union (Nupes) led by Jean-Luc Melenchon. Together ! would collect between 260 and 300 seats and the Nupes between 170 and 210, according to the projections of Opinion Way. The absolute majority is fixed at 289 deputies out of a total of 377 elected.
Uncertainties surrounding the vaccine candidate of Valneva
Valneva plunged 21.7%. The biotech reported Friday evening that the preliminary volume indications received from the European Commission would not be sufficient to ensure the sustainability of the Covid-19 vaccine program..
Banks are also under pressure as the ECB did not give, last Thursday, any indication of the tools it intends to implement to support the bonds of so-called peripheral countries in the face of the risk of widening yield spreads. BNP Paribas, Agricultural credit and Societe Generale lose between 2.9% and 4%.
Sensitive to the economic environment, cyclical and technological stocks are following suit. Renault decrease of 4.3%, Unibail-Rodamco-Westfield 4% and STMicroelectronics 3%.
Atos plunged 9.3%. The group, which is due to announce a strategic plan on Tuesday, plans to isolate its IT services business into a separate legal entityreported Monday BFM Business without citing its source.
against the trend, Thales gains 4.8%. Goldman Sachs resumed coverage of the stock with a “buy” recommendation to target 146 euros. Among other analyst notes, Bernstein noted Orange from “line performance” to “outperformance”. The action of the telecom operator takes 0.5%.