« With the job market still going strong – including very rapid wage growth – we doubt that the Fed give up direction hawkish due to the current weakness in equities. This is the sentiment of Paul Ashworth, chief economist at Capital Economics, who explains that the stock markets have let go again this Friday.
At the close of this Friday, the Cac 40 lost 1.73%, falling below the threshold of 6,300 points for the first time since March 15, in a rather high volume of 4.8 billion euros. At the low of the session, the flagship index fell by more than 2.4%. In New York, the Dow Jones fell by 0.59% after a fall of more than 3% the day before and the Nasdaq Composite by 0.79%, the day after its plunge of almost 5%, its largest drop since 2020. At this last score, the index of tech and growth stocks, very sensitive to interest rate increases, has fallen by 22% since the start of the year.
In April, the US economy created 428,000 jobs in the non-farm sector, beyond the 380,000 expected and as in March (revised from 431,000). The rate of unemployment remained stable at 3.6% of the working population, while the average hourly wage increased by 0.3% over one month and 5.5% over one year, broadly in line with expectations.
The increase in hourly wages is admittedly modest, “ but the upward revision to previous months’ earnings shows that the annual rate of wage growth only fell from 5.6% to 5.5%. In an economy where productivity is collapsing, such high wage growth is far from in line with a 2% inflation target “, further deciphers Mr. Ashworth. In the first quarter, the productivity of the American non-agricultural sector fell by 7.5% (data published on Thursday), a rate not seen since 1947.
“As transient as inflation”
Today’s figures appear to give the US Federal Reserve ample scope to continue raising interest rates in an effort to stem soaring prices, fueled in large part by supply difficulties and the war in Ukraine, and which for the moment shows no sign of appeasement. Since then, ” 50 basis point hikes could turn out as well ‘transient’ than inflation “, estimates Jeffrey Halley, market analyst at Oanda, in reference to the position that Jerome Powellthe chairman of the Fed, has long defended.
« Unless soaring inflation quickly reverses course [les prochains chiffres des prix à la consommation sont attendus mercredi prochain], central banks may have no choice but to slow growth to slow inflation and maintain credibility “, That is to say to raise perhaps even more actively the cost of money, judge for his part Emmanuel Cau, at Barclays. At the last meeting on Tuesday and Wednesday, which ended with a 50 basis point increase in Fed fundsthe head of the Federal Reserve had said do not consider actively » rate hikes of 75 points. At the European close, the yield on American 10-year paper is moving well above 3%, to 3.091%.
Adidas and JCDecaux weighed down by the Chine
China also weighed on the trend. Not directly, no statistics were programmed there this Friday, but by the impact that the confinements established in the country have on the accounts and forecasts of companies. In Paris, JCDecaux plunged more than 10%. In the second quarter, growth, at constant scope and exchange rates, will only be 15%, a high level but half as high as analysts expected. The world number one in outdoor generates about 20% of its turnover in the country, two-thirds of which in the mainland. After Shanghai, it is Beijing that could be confined to cut off the spread of Omicron.
Fears which also weighed on the “heavy” compartment of the Cac 40, that of luxury. L’Oreal, Hermès International, Dry et LVMH lost 2.1% to 4%. Pernod Ricard fell 4.9%. When publishing its nine-month sales, the spirits group indicated that health restrictions had already had an effect “ significant » on the activity of the third quarter and that they should continue to disturb her in the fourth.
In Frankfurt it is Adidas which dropped more than 5% at the lowest of the session, the biggest drop in the Dax. The German sports equipment manufacturer suffers from these same confinements in China, where revenue plunged 35% in the first quarter, but also bottlenecks in its supplies from Vietnam. Forecasts have been revised downwards for the year as a whole.
Note thatEuropea subsidiary of active pharmaceutical ingredients of Sanofia jumped 12.6% on its first day of trading.