The control room of Euronext, the company that manages the Paris Stock Exchange (AFP / Eric PIERMONT)
The Paris Stock Exchange was overwhelmed Friday by the acceleration of prices in the United States which fuels fears of recession and accentuates the tension on the sovereign debt market.
The star CAC 40 index fell 2.69% to 6,187.23 points, presenting a calamitous weekly balance sheet (-4.60%).
All of the European indices as well as Wall Street also took a nosedive. Frankfurt fell 3.08%, London 2.12%, and Milan lost more than 5%. When European markets closed, the Dow Jones lost 2.51% and the Nasdaq 3.57%.
“Investors are currently digesting the ECB’s revised upward inflation expectations and the potential interest rate hikes that flow directly from it. In addition, the US inflation data is driving reluctance to buy,” comments Andreas. Lipkow, for Comdirect.
Inflation picked up again in May in the United States, accelerating after a short-lived respite in April, and hitting a new 40-year high, which heightened concerns about growth.
“A priori not enough to convince the Fed that the worst of the price shock is exceeded”, analyze the economists of the Riches-Flores cabinet.
“It was already expected that the Fed will maintain its restrictive course during its monetary committee (FOMC) on Wednesday: anticipation is clearly reinforced,” they continue.
To make matters worse, U.S. consumer confidence fell in June, after already deteriorating sharply the previous month, and hit an all-time low, according to the preliminary estimate of the University of Michigan released Friday.
Thursday, the announcements of the European Central Bank (ECB) had already pushed back the stock markets and caused strong tension on the sovereign debt market. The monetary institution had confirmed that it would cease its purchases of bonds in early July on the markets and that it would raise its rates on July 21 by a quarter of a point, as expected.
However, it warned at the same time that a 50 basis point rise could also take place in September if the inflation outlook persisted or deteriorated, which caused strong tension in the sovereign debt market.
The rate differentials between the so-called “peripheral” countries and Germany continued to widen: “the markets therefore seem to have indeed begun to position themselves in the perspective of a new crisis which would have as its starting point the character unsustainable rise in rates for the most indebted countries in the region” of the euro zone, underlines the firm Riches-Flores.
In terms of values, the forty values making up the CAC 40 ended in the red, with no sector having been spared. Banks suffered a severe correction (more than 5%).