Cac 40: The Fed heads for a new twist on inflation to reduce inflation, the stock market is derailed

(BFM Bourse) – In the wake of the bright red shutdown in US indices, the Paris market began to fall again on Wednesday, punished by restrictive comments from a Fed official, new sanctions against Russia and growing uncertainty over the outcome of the Fed. presidential elections in France.

In slight decline at the opening of trading on Wednesday the day after falling 1.28%, the CAC 40 increased its initial losses in the morning and fell 1.81% to 6,525 points around 1:20 p.m., a level that would correspond to a 3-week low at the close. “There are far too many uncertainties in the market,” Saxo Bank analysts summed up in their morning note. Investors are particularly concerned about “the impending new sanctions against Moscow, which may include an energy component for the first time,” said John Plassard, deputy director of investment at Mirabaud. “The more hawkish tone of certain members of the Fed is also an argument that explains the trend for the day,” he added.

Indeed, on Wall Street, Tuesday’s session was “dominated by comments from Fed Governor Lael Brainard, who set fire to stock and bond markets with highly restrictive remarks,” said Oanda analyst Jeffrey Halley. Lael Brainard hinted that a cut in the Fed’s balance sheet, called quantitative tightening, could begin as early as next month and at a much faster pace than previous efforts. She further hinted that a 0.50% rate hike was on the table Since the Fed was willing to take “strong measures” to contain inflationary pressures, what makes tonight’s comments so important is that Ms. Brainard is usually one of the most “friendly” (accommodating) members of the FOMC (the “federalOpen market” of the Fed). If it has moved from the camp of the “pigeons” to that of the “hawks” (restrictive), the markets should take note and they have,” the expert develops.

Markets also remain alert to the introduction of additional sanctions against Russia, in the context of the war in Ukraine. The European Commission on Tuesday proposed that the Union’s 27 countries halt their purchases of Russian coal, which represents 45% of EU imports, and close their ports to ships operated by Russians. The European Union will have to take sanctions “sooner or later” against Russian oil and gas, European Council President Charles Michel also stated on Wednesday.

The narrowing gap between Macron and Le Pen

The trend in Paris on Wednesday is also plagued by mild but growing fears about the outcome of the French presidential election, the first round of which will take place on Sunday. The negative orientation of the market “thus reflects the integration of risk premiums”, with the gap narrowing in the second round of polls between the two favorites Emmanuel Macron and Marine Le Pen, analysts at Banque Postale AM ​​believe.

As macroeconomic uncertainties mount, there is still dead calm at the microeconomic level just days before launch (Tuesday) LVMHof a new season with quarterly results, during which the operators will in particular examine the prospects of the flagships of the French coast in a deteriorating context.

Meanwhile, and just like the day before, at noon we find several auto and banking stocks among the biggest dips in the flagship index (-4.7% for Stellantis-3.6% for Societe Generale-3.3% for GDP-3% for Renaultholy gobain (-4.2%) and STMicro (-3.5%) also accelerated their decline. And on the other hand, the floating values ​​are rare (+2.6% for Carrefour, +1.7% for Eurofins).

EDF, for its part, sells 2.8% after completing its capital increase of more than 3.1 billion euros – including 2.7 billion provided by the state – with an operation almost 130% oversubscribed.

Among the rare news of the day, the medical diagnostic specialist Eurobio Scientific confirms the change of dimension observed in 2020 with the publication of annual results close to those of the previous year, but a decrease of 5.6%.

In terms of oil, prices rose slightly (+1.1% to $107.2 for the Brent) as the EU prepares to break the “energy taboo” with its forthcoming embargo on Russian coal. In the foreign exchange market, the single currency temporarily put an end to the violent decline of the recent sessions against the dollar (sold more than 2% in the last 4 days) and is thus trading at $1.0907, ie a level unchanged from the day before .

Quentin Soubranne – ©2022 BFM Bourse