Published January 19, 2023, 4:18 pmUpdated January 19, 2023, 4:34 pm
The Paris Stock Exchange erased the gains of the last five sessions, abruptly ending its longest bull run since mid-November 2021. The hope aroused by the reopening of the Chinese economy is overshadowed by reviving the specter of recession for US indicators . While these data lend credence to the prospect of a more moderate rate hike by the Fed in February, there is no indication that this will happen. Christine Lagarde confirmed that the ECB will persevere on the path of monetary tightening.
Shortly after 4pm, the Bedroom 40 it lost 1.71% to 6,962.36 points on a turnover of 1.83 billion euros. In New York, the Dow Jones yields 0.62% and the Nasdaq Composite 0.88%.
On the statistical front, US housing starts fell 1.4% to 1.38 million units year-on-year in December, the weakest reading since July, while the Philadelphia Fed’s activity index fell to -8.9 points in January, confirming the trend already reflected in the sharp drop in retail sales or the sharp contraction in industrial production, which have rekindled the specter of recession. However, the much steeper-than-expected decline in the producer price index suggests that inflation has peaked. But the drop in weekly jobless claims from 15,000 to 190,000, basically from the week through Sept. 23, isn’t necessarily the Fed’s business. The slowdown in economic activity has deepened.” concerns about business and revenue growthfor equity investors, while reinforcing the disinflation discourse for bond investors, summarize the strategists at JPMorgan.
The ECB will stay on course on rate hikes
Christine Lagarde, the president of the European Central Bank, reiterated today from Davos that she is determined to revive inflation, which is still definitely too high to 2% as quickly as possible. As if to make himself better understood, he added that the ECB will stay the course on rate hikes. The minutes of the last meeting of the central bank’s board of directors underline this many of its members were in favor of more marked tightening.
” The minutes of the December meeting, together with data released since then and recent comments from monetary policymakers, suggest that the ECB will raise the deposit rate from 2% to 3% in March, rather than in May, as previously anticipatedexplains Andrew Kenningham, chief economist Europe at Capital Economics. For now, we expect the deposit rate to peak at 3%, but with core inflation continuing to climb, risks remain to the upside “.
The yield on European government bonds tightens again, that of the 10-year German Bund, which serves as a benchmark in the euro area, thus rises by 3 basis points to 2.0540%, as does that of the French OAT with the same maturity at 2.4780%. The trend is comparable for the American T-Bond. The technology sector of the rating is the first to be hit with a 2.2% drop in the associated Stoxx 600. In Paris, STMicroelectronics loses 2.6%, Teleperformance 2% and World line 2.6%.
In the US, James Bullard of the St. Louis Fed and Loretta Mester of the Cleveland branch insisted that the Federal Reserve must continue to fight inflation, the former even seeing the Fed Funds rate reach 5.25%, – 5.5% versus a range of 4.25% to 4.5% currently, judging this level is not yet” restrictive However, these two FOMC members are considered “hawkish” and their views do not necessarily reflect those of their colleagues.
Raw materials under pressure
Sensitive to the economic outlook, commodity-related stocks are the hardest hit, with the Stoxx 600 Oil & Gas and Basic Resources Indices among the biggest sector declines in Europe. Arcelor Mittal down 3.3%, Eramet 3.5%, TotalEnergie by 2% and Vallourec by 2.6%.
The luxury sector follows. LVM extension loses 2.4% and Hermes 2.2% after the previous day’s records. Kering yields 2.2%.
Accor rose 2.7%, supported by a rating from Barclays, which moved from “underweight” to “line weight” on the stock, believing there are now more positives than negatives for the group, thanks in particular to the reopening of China . Among other analyst ratings, HSBC downgraded Renault (-1.8%) and FnacDarty (-1.2%) from “buy” to “hold”.