(CercleFinance.com) – Stock market indices fell like a lead as soon as Jerome Powell spoke: the CAC40 fell in less than 5 minutes from equilibrium to -1.7% towards 6.275 (in the wake of the S&P500 changed from 4,200 to 4,125).
The FED will ‘vigorously’ use all its tools to fight inflation and we must beware of changing monetary policy too quickly.
This fight against inflation will slow down US growth – and this, in a lasting way – and make households suffer, says Jerome Powell.
This speech of firmness acts as a cold shower on Wall Street which was about to reopen unchanged: the Dow Jones falls by -1.3%, the S&P500 falls by -1.5%, and the Nasdaq, the most sensitive to the tension in rates, loose nearly -1.9%. the US inflation figures.
But one of the victims of the day will also be the Dollar, which fell by -0.6% and fell back below parity against the Euro towards 1.003.
The speech of the head of the FED spoils the good surprise of the ‘PCE’ which had been well received.
Indeed, the ‘PCE’ (or food basket) index stagnated in August: the overall PCE advanced by 0.1% but the ‘core PCE’ (excluding food) fell by -0.1%. in sequential.
Over 1 year, the overall PCE rose by +6.3% (vs. 6.8% in July), the ‘core PCE’ by +4.6% (vs. 4.8% in July).
These last 2 figures arouse a lot of disbelief in the face of a real loss of purchasing power which is around 10% on an annual basis.
Wall Street, which took a hit on the head around 4:05 p.m., could not celebrate the good consumer confidence index of the University of Michigan which came out at 58.2 in August in the 2nd estimate against a first of 55.1 after 51.5 in July.
Bond markets are also reacting to the most aggressive rates strategy since the Volcker era in the early 1980s.
In four meetings, its rates were raised by 25 basis points, then 50 points before two increases of 75 basis points each, a new tightening of the screw of 75% – now highly probable – would propel the cost of money towards 3 .00%; James Bullard aims for a cost of money of 3.75% to 4% at the start of 2023.
After their upturn the previous day, Treasury bond yields tightened by +4Pts to 3.055%, that of the 10-year German Bund, the benchmark on the bond market in Europe, posted +4Pts to 1.400%, the yield of the ‘OAT (+5Pts) returns to the 2% mark, at 2.02%, Italian BTPs also show +5Pts at 3.72%.
Oil prices fell after Powell’s speech, which anchored expectations in a recessionary perspective: American light crude (West Texas Intermediate, WTI), lost -1.2%, as did ‘Brent’ towards $98.8.
In the news of values, last night Plastivaloire published a turnover of 179.6 ME for the 3rd quarter, up 10.8% at constant exchange rate compared to the same period a year earlier ( or +11.6% in published data).
TotalEnergies formally denied press reports on Friday that the French oil group would produce kerosene for the Russian army. “It is clear that certain media allegations and calls to investigate the activities of TotalEnergies in our joint ventures have absolutely no basis in fact,” the group says.
Lacroix publishes a turnover of 173.2 million euros for the second quarter of 2022, an increase of 36.2% in annual comparison, thus marking an acceleration compared to the first quarter (+ 29.4%) .