The Paris Bourse will not raise its head at the start of Monday’s session. Weighed down by the fall of Wall Street on Friday (-3% for the Dow Jones and almost 4% for the Nasdaq Composite) and while the Asian markets are also evolving in the red this morning, the Cac 40 is preparing to drop more than 1% according to the indications of the futures contracts after having already yielded 1.68% at the end of last week.
He is ” Gone are the days when we could count on a stock market rally backed by Powell “Summarizes this morning Ipek Ozkardeskaya, at Swissquote. In his address to Jackson Hole on Friday, Fed Chairman Jerome Powell was sharp and to the point: “ his message was crystal clear: inflation must come down even if it means pain for households and businesses ».
Surprisingly resilient employment
In other words, expect key rate hikes to continue, and in movements whose magnitude could remain strong. During the next session in September, the monetary policy committee could well opt for a new tightening of the screw by 75 basis points. It would be the third in a row. Especially since Jerome Powell also mentioned how surprisingly resilient the US job market is. He thus hinted that the Fed could be tolerant of some deterioration in the employment figures. It is this Friday that the statistics relating to the labor market for the month of August will be unveiled.
On the stock market, the pressure also comes from Europe, where representatives of the ECB also made their offensive remarks on Friday in Wyoming. Both Isabel Schnabel and François Villeroy de Galhau have declared themselves in favor of a sharp rise in interest rates in September, in the face of still very high inflation which could undermine the central bank’s credibility in the fight against soaring prices. .
75 basis points on September 8?
The ECB raised interest rates in July for the first time in 11 years, raising its deposit rate by 50 basis points to zero, as inflation fears outweighed risks of a degradation of the economic environment. The scenario of a similar or even higher rate hike of 75 basis points as in the United States now seems to be on the table for the September 8 meeting. ” We need to be able to discuss both 50 and 75 basis points as possible hikessaid Marins Kazaks, another member of the Board of Governors. From the current perspective, it should be at least 50 “. The neutral rate is evaluated at 1.5% in the euro zone by the central bank. It should be reached at the end of the year according to Villeroy de Galhau and at the beginning of 2023 according to Kazaks.
In the absence of a leading figure on today’s agenda, the markets should sail on sight on Monday. We are only awaiting the results of the Dallas Federal Reserve survey for August, at 4:30 p.m., a statistic that is not likely to influence the market. In New York, the index contracts point for the moment once again towards the red. Note that the English markets are closed for “Summer Bank Holiday”.