Plunge 6400 after inflation in the euro area

(CercleFinance.com) — The Paris Stock Exchange is down about 0.7%, about 6,380 points, as investors appear to be taking a breather after four sessions of increases in the past six.

“In our new stock market strategy, we assume that stocks will move forward once the new monetary situation is incorporated and the exaggerated risks of recession are removed,” Danske Bank strategists recalled this morning.

The Danish bank explains that “what happened yesterday is a good example of these two elements, as economic statistics and the unsurprising intervention of Powell helped lift investor sentiment.”

However, we at Aurel note that investors are increasingly concerned about global growth, with optimism at an all-time low, according to a survey in May.

In this context, the Federal Reserve Chairman confirmed yesterday that the central bank will continue to raise key interest rates as long as inflation is not under control.

He also confirmed that a 50 basis point hike in interest rates will be considered in the next two foundation meetings, which implicitly rules out the 75 basis point rate hike scenario that the markets are very afraid of.

Danske Bank argues: “The big news is that Powell believes that financial markets are adjusting well to the new Fed policy.”

However, the prospect of an upcoming interest rate hike has triggered a new cycle of volatility in the bond markets, which could prevent stock markets from responding positively to the good news.

The yield on the US 10-year Treasury rose to 2.98% yesterday, approaching the psychological threshold of 3% that investors are closely following.

These tensions raise fears of an increase in the cost of corporate finance, as well as of credit to individuals, which could ultimately penalize growth.

On the macroeconomic front, we learned at the end of the morning the latest inflation figures in the Eurozone. The annual inflation rate in the euro area reached 7.4% in April 2022, stable compared to March, according to Eurostat, which announced the end of last month, a rise of 0.1 points at 7.5% for the month of April.

The largest contributions to the region’s annual inflation rate came from energy (+3.70 percentage points, pp), followed by services (+1.38pp), food, alcohol and tobacco (+1.35pp) and industrial goods excluding energy (+1.02 points). .

In French corporate news, Air Liquide has announced the signing of a ten-year contract with Shell Energy Europe Limited (SEEL) to purchase renewable energy aimed at supplying industrial and medical gas production in northeastern Italy.

TotalEnergies announces the signing of a commercial agreement with New Hope Energy, which will build a chemical recycling plant in Texas to convert plastic waste into recycled raw material, a portion of which will be sold to TotalEnergies.

Carlos Tavares, CEO of Stellantis, said the auto group intends to develop and strengthen its presence in India, a market considered “strategic” and which is a key pillar of the group’s international ambitions.

Elior Group in the first half of 2021-22 posted a group net income share of -266 million euros, compared to -53 million a year earlier, and EBITA adjusted from continuing operations of -16 million, compared to -25 million a year earlier. The Catering and Services group achieved a turnover of 2.24 billion euros, with an organic growth of 18%.

Bouygues announces the successful offering of its €2 billion issued bonds consisting of two tranches of €1 billion each in seven and 15 years, carrying coupons of 2.25% and 3.25%, respectively.

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