The Paris Bourse ended sharply down 2.21% on Wednesday, fearing new Western sanctions once morest Russia and a recession in the American economy with the prospect of a severe tightening of monetary policy by the Federal Reserve.
The CAC 40 star index lost 146.68 points to 6,498.83 points. On Tuesday, it had already fallen 1.28%.
Throughout the day, the Parisian rating widened its losses, slowly but surely, losing up to 3% shortly following 4:00 p.m. compared to the previous day’s close.
Investors were still digesting tougher-than-expected remarks from Federal Reserve Governor Lael Brainard on Tuesday, who is known for her dovish stances on monetary policy.
She assured that the Fed was ready to “act more strongly” once morest inflation, in particular by selling financial assets, from its next monetary meeting in May.
The speech weighed on the financial markets because “if the monetary tightening is too aggressive, it might have a devastating effect on the American economy”, affirms Philippe Cohen, portfolio manager at Kiplink Finance.
He qualifies however: “the Fed sends trial balloons in its speech but I do not think that it will be so severe in passing to the act”.
The hypothesis of a reduction in the Fed’s balance sheet from its next monetary policy meeting in early May is in any case “credible” according to the manager.
The second downside factor is possible new sanctions once morest Russia, “which are coming back with a boomerang effect and complicated consequences for the European economy”, underlines Philippe Cohen, portfolio manager of Kiplink Finance.
The European Union will have to take sanctions on Russian oil and gas “sooner or later”, declared the President of the European Council, while the Twenty-Seven are currently discussing new sanctions on coal and investments in the country.
The United States has for its part announced a new volley of economic and financial sanctions targeting the big banks and the children of Vladimir Putin. The United Kingdom has also tightened its measures, banning all investment and targeting the banking and energy sectors.
Finally, the French presidential election “adds a little feverishness to the French market”, observes Philippe Cohen. “The latest polls for the second round of the presidential election show a narrowing gap between Emmanuel Macron and Marine Le Pen” and a possible victory for the National Rally candidate within the margin of error.
Industrial companies struggling
On the Parisian market, the values of companies dependent on economic growth, like industrialists, have suffered.
Tech companies have also recorded losses due to the rise in interest rates, which penalizes their ability to finance their growth.