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Paris (AFP) – The Paris Bourse concluded a third session in the red on Friday, continuing to bear the full brunt of the latest decisions by central banks, the prospects for economic deceleration and high inflation for next year.
The CAC 40 index fell 1.08% to 6,452.63 points the day after a fall of more than 3%, its biggest drop since March 4. Over the week, it posted a loss of 3.37%.
Private sector activity contracted more than expected in December, penalized by the services sector, and reached its lowest level since February 2021, according to the PMI Flash indicator published Friday by the firm S&P Global .
A data received negatively by the actors of the Paris Stock Exchange already worried that the rate hikes carried out by the central banks will push the economy towards recession.
“We clearly have a market turnaround, caused by the central banks. Probably the famous Christmas rise should be forgotten,” observes Raphaël Thuin, head of capital market strategies at Tikehau Capital.
In recent days, the American and European central banks “surprised or even shocked the markets which were driven by the hope of inflation which would return very quickly to more acceptable levels and that of a recession which would be weak and short-lived in 2023”, recalls the expert.
Instead of this scenario, investors suffered “the cold shower” by “central bankers determined to bring down inflation which is too high and which justifies that a restrictive policy on the monetary level be maintained over time” .
This week, the American (Fed), European (ECB) and British central banks raised their key rates by 0.5 percentage points, moderate increases compared to the previous ones.
But the message from the Fed and the ECB in favor of sustainably higher interest rates at the expense of growth has cooled investors who were hoping for signs of a pause or an imminent end to the current monetary tightening cycle.
At the same time, “there are more and more signals suggesting that the economic slowdown is real” but the market “is badly positioned in relation to this slowdown” judging by the profit expectations of companies which remain “very optimistic” about 2023, underlines the expert.
“Between two pieces of log, it will be necessary to open your eyes wide and watch what the markets are doing”, as investors enter weeks of low trading volumes as the end of the year holidays approach, concludes Mr. Thuin.
Banking stocks are doing well
The banking sector benefited from the scenario of rising rates: BNP Paribas (+1.68%), Société Générale (+1.27%) and Crédit Agricole (+0.41%) were the only values in the green of the CAC 40.
On the other hand, the prospect of a rise in rates was unfavorable to the real estate segment: the action of the specialist in commercial real estate Unibail found itself at the bottom of the index (-4.74%).
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