Sent Oct 17, 2022 5:16 PMUpdated October 18, 2022 at 8:29 am
Global markets started the week on the right foot. In Europe as well as in the United States, the major stock indices recovered after several weeks of testing on Monday. Investors welcomed the UK government’s decision to revert to some fiscal orthodoxy.
In Paris, the CAC 40 is about to close above 6,000 points for the first time since 4 October. In the late afternoon it recorded gains of 1.7%, similar to the German DAX (+ 1.6%). At the same time, Wall Street skyrocketed, with gains of 2.2% for the S&P 500 and 2.7% for the heavily tech Nasdaq. Strong comeback after the turbulent session on Friday: the Nasdaq had lost more than 3% and the S&P 500 was down 2.3% to in the aftermath of political turmoil abroad.
The pound comes back together
In an effort to calm the markets, new finance minister Jeremy Hunt canceled many of the planned tax cuts by announcing a cut in public spending. This is enough to reassure investors who feared that the UK was pursuing unsustainable fiscal policies. He took advantage of the pound, which recovered 1.9% against the greenback, to $ 1,139 for one pound.
Above all, bond markets eased strongly in the wake of UK announcements, contributing heavily to the rebound in equity markets. The yield on 10-year gilts fell over 36 basis points over the day, dropping below 4%. In the process, the yield on Treasuries of the same maturity fell by 5 basis points and that on OATs by 8 basis points, to 2.84%.
This week with a bang for global equity markets remains fragile and vulnerable to any unpleasant surprises. On the quarterly earnings front, Bank of America certainly reassured investors Monday announcing higher-than-expected interest income, but more big names are expected this week, including Netflix, Tesla and consumer goods giant Procter and Gamble.
But even if companies do better than expected, “the relief will be short-lived for the markets,” analysts at Morgan Stanley said. In short, regardless of the results of the past three months, investors are concerned about the economic outlook for the months ahead. All the more so as the Federal Reserve and the European Central Bank seem determined to continue tightening their monetary policy until inflation is clearly under control, a prospect still uncertain.