(News Bulletin 247) – The day after a rebound of 0.87%, the Paris Stock Exchange closed down sharply by 1.9%. The vindictive tone of the Fed to curb inflation out of control tensed the market.
To follow this post-meeting session of the Federal Reserve, it was better to have strong nerves. After having opened on a drop of more than 1.7%, the CAC 40 had managed to limit the decline to 0.7% at mid-session… Before falling back into its bearish biases and closing at the lowest of the day at 5,918.50 points on a decline of 1.87% Thursday evening.
The market continues to digest the announcements of the American Federal Reserve (Fed) which, as expected by the market, raised its key rates by 75 basis points (0.75 percentage points) on Wednesday evening. But the American central bank surprised on its “dot plots”, that is to say the projections of its members on the level of rates at a given horizon.
“Surprise surprise” on the forecasts of the key rate
“But, surprise surprise, the forecast for the key rate for the end of 2023 has risen sharply. The governors understand that inflation will be tough. Twelve of them, out of nineteen, believe that this rate will be higher at 4.50%! Employment is solid and rents will continue to rise. The large savings accumulated by households during the crisis will allow them to withstand price increases”, analyzes Frédéric Rollin, investment strategy advisor at Pictet AM
“The median forecast of its members now stands at 4.4% at the end of 2022 and then 4.6% at the end of 2023, compared to 3.4% and 3.8% respectively at the June meeting. These projections imply, for this year, “a further increase of three quarters of a point and an increase of half a point”, adds for his part John Plassard, investment adviser at Mirabaud.
“The speech is simple, the tone is serious. To weigh on demand and ultimately reduce inflationary pressures, the Fed intends to continue monetary tightening at a sustained pace at least until the beginning of 2023”, considers Bruno Cavalier of Oddo BHF. “The Fed has made it clear, once again, that it is determined to do whatever is necessary to control inflation,” said Naeem Aslam. The fight against inflation will therefore increasingly be at the cost of a recession. A scenario that is far from reassuring investors…
Many other central banks made announcements on Thursday, with inflation guiding monetary policy decisions. Among them, the Swiss National Bank ended seven years of negative policy rates by raising them by 75 basis points to 0.5%. The Bank of England also increased its key rate by 0.5%, as did the Bank of Norway and Indonesia.
On the other hand, the Turkish central bank is going it alone and has just lowered its main key rate for the second consecutive month, from 13% to 12%. In addition, the Japanese government has admitted having intervened on the foreign exchange market to defend the yen against the dollar at its worst.
An analyst presses “pause” for Ubisoft
On the value side, Elior ended down more than 8%, Accor lost 7.4% suffering a downgrade from JPMorgan to “underweight”.
Ubisoft dropped more than 6.7%, penalized by the financial intermediary Stifel, which revised its target price down to 35 euros, against 50 euros previously on the video game publisher.
DBV Technologies also fell 6.7% after being forced to suspend a clinical trial started just two weeks ago due to protocol changes requested by the US health authority, the FDA.
Conversely, M6 (+6.4%) was in sight following the publication of an article by FinancialTimes referring to the resale of the sixth channel by its German owner Bertelsmann. The title TF1 a little less (+ 1.7%).
On the small-cap side, Inventiva closed up 14.6% after gaining more than 25% at the peak of the day. The Burgundy firm has signed a contract with the Chinese Sino Biopharm to develop and market its lanifibranor molecule in China.
The green chemistry specialist Metex (+ 1.15%) issued a press release to deny press reports explaining that the group had put its Amiens plant on short-time working.
The yen recovers
As for other assets, the dollar lost 1.45% against the yen after Tokyo’s currency intervention, at 142.16 yen. The euro, for its part, is holding up against the dollar, at 0.9829 dollars, after having collapsed on Wednesday (-1.4%) after the announcement of the decision of the American Federal Reserve.
Oil prices have picked up some color. The November contract for Brent from the North Sea gained 0.9% to 90.81 dollars while that of the same expiry date on WTI listed on the Nymex also advanced by 0.9% to 83.81 dollars.