Europe in the red, fears of recession haunt the markets – 06/29/2022 at 18:37

Europe in the red, fears of recession haunt the markets - 06/29/2022 at 18:37
EUROPE FINISHED IN RED

EUROPE FINISHED IN RED

by Laetitia Volga

PARIS (Reuters) – European stock markets ended lower on Wednesday on renewed fears of recession as the major central banks – led by the US Federal Reserve – are tightening their monetary policy.

In Paris, the CAC 40 lost 0.9% to 6,031.48 points. The British Footsie lost 0.15% and the German Dax lost 1.73%.

The EuroStoxx 50 index fell by 0.99%, the FTSEurofirst 300 by 0.44% and the Stoxx 600 by 0.67%.

At the close of European trading, the Dow Jones index was stable, thanks to Goldman Sachs, supported by the switch to the “buy” of BofA, while the Standard & Poor’s 500 lost 0.2% and the Nasdaq Composite 0 .4%, investors worried about the impact on the economy of monetary tightening by the Fed, determined to act against inflation.

Federal Reserve Chairman Jerome Powell told the European Central Bank’s (ECB) Annual Forum in Portugal that there was a risk that the Fed’s interest rate hike would slow the economy too much. economy but that the greatest danger remained the high level of inflation over a long period.

Several Fed officials have pleaded in recent days in favor of a faster rise in interest rates to bring down inflation, which is not likely to reassure the markets, as well as the contraction a little higher than expected gross domestic product in the United States in the first quarter.

“Jerome Powell’s comment that controlling inflation involves ‘pain’ could only encourage more investors to hit the sell button,” said IG analyst Chris Beauchamp. “A lasting rebound seems unlikely.”

The announcement of an unexpected slowdown in German inflation to 8.2% year on year in June and a decline of 0.1% month on month was not enough to support the shares, especially since Christine Lagarde, the President of the ECB, considered a return to a period of very low inflation unlikely.

VALUES

Carried on Tuesday by the easing of quarantine rules for foreign travelers to China, cyclical compartments – such as the automobile sector (-2.6%) – started to fall again, affected by economic fears,

Only the defensive health sector ended in the green (+0.73%).

In Paris, Sanofi (+1.52%) took the lead in the CAC 40 and Renault (-5.57%) was the bottom of the index. Elsewhere in Europe, H&M rose 2.2% after posting a better-than-expected quarterly profit. Biggest drop in the Stoxx 600, Just Eat Takeaway fell 16.52% after statements by the managing director of its American subsidiary Grubhub specifying that its sale is not imminent.

CHANGES

The euro went into the red after the declarations of Christine Lagarde, the president of the ECB, on the probable end of the era of very low inflation.

The single European currency fell 0.44% to 1.0472 dollars, the lowest in a week. The dollar, helped by its status as a safe haven, took 0.36% against a basket of international currencies.

The pound sterling fell nearly 0.5% against the greenback following remarks deemed accommodating by Swati Dhingra, who is due to join the Bank of England’s Monetary Policy Committee in August. The economist said Britain’s central bank needed to tighten policy very gradually as there are signs that a slowdown in the economy is closer than expected.

RATES Yields on government bonds in the eurozone ended sharply lower: that of the German ten-year lost more than 13 basis points to 1.506% and the French ten-year closed at 2.053%. Treasuries with the same maturity fell by 10.5 basis points to 3.1022%.

OIL

The oil market edged higher as supply concerns narrowly outweighed global economic concerns.

Brent gained 0.05% to 118.04 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.21% to 111.99 dollars.

TO BE CONTINUED :

(Written by Laetitia Volga, with Olivier Cherfan, edited by Bertrand Boucey)

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