The Paris Stock Exchange ends down 0.6% after US employment
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(News Bulletin 247) – The Paris Stock Exchange ended this week down 0.6%, reacting to the unexpected rebound in job creations in the United States. The excellent health of the job market on the other side of the Atlantic bodes well for an even stricter stance by the Federal Reserve on interest rates. Despite everything, the CAC 40 posted a positive performance on a weekly basis.

In normal times, an improvement in the job market in the United States would have been welcomed. But the operators were burned by the big meeting of the day, they were still convinced of the moderation of the Fed in the conduct of its monetary policy. Hopes are all but dashed, with investors now expecting another three-quarters of a percentage point rate hike at the September meeting.

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The CAC 40 closes this last session of the week down 0.63% to 6,472.35 points after losing nearly 1% in reaction to this employment report (-0.95% to 6,449.72 points at the lowest of the day). On a weekly basis, the balance sheet is positive, the Parisian rating continues a fifth week in the green (+0.37%).

A buoyant US job market

The health of the job market in the world’s largest economy is looking good. It created 528,000 job creations in July, where analysts expected 250,000 new hires. The June balance was also revised up to 398,000 from 372,000 previously estimated. For its part, the unemployment rate fell by 0.1 point to 3.5%, returning to a pre-pandemic level. The average hourly wage rose by 0.5% over one month, ie an increase in hourly earnings of 5.2% over one year due to the labor shortage. Inflation seems to be confirmed, which should push the Fed to continue its movement towards monetary normalization if inflation does not subside. On this subject, the statement by Loretta Mester of the Federal Reserve office in Cleveland leaves no doubt about the position favored by Fed officials. It indicates that a pause in rate hikes may only come in the second half of 2023.

According to CME Group futures calculations, the probability of another 0.75% rate hike in September is estimated at nearly 70% from 34% the previous day. Expectations of an upcoming monetary tightening were also reflected in the bond markets. The yield on the 10-year US bond stretched to 2.858%, while that of the 2-year maturity jumped to 3.252%.

Sensitive to interest rate hikes, Teleperformance lost 6.25% on Friday at the close. On the other hand, the banks pulled out of the game like Crédit Agricole (+2%), BNP Paribas (+1.1%), Axa (+1.5%) while Société Générale posted a symbolic gain by 0.02%.

Publicis lost 2.6% in the wake of the British advertising giant WPP whose half-year results were sanctioned in London.

Rothschild & Co limited its losses to 5.2%, the financial establishment saw its profits fall sharply in the first half, its investment activity and private debt having weighed on the accounts.

Although rising on Friday, oil prices are still trading at pre-Russian invasion levels on fears of a slowing global economy. A barrel of Brent rose 1.8% to 95.79 dollars while WTI gained 1.7% to 89.59 dollars.