2023-08-15 15:45:14
The Paris Stock Exchange did not last long. If it opened around equilibrium, it was quickly weighed down by the accumulation of bad news throughout the session, in China first, with worrying figures of one point on the economic level, but also from the United States. While July’s retail sales were better than expected, the further surge in bond yields raised concerns, as did Fitch’s warning of a possible downgrade in bank credit ratings.
At the close, the Cac 40 fell 1.1%, to 7,267.70 points, in a business volume further reduced by 1.93 billion euros, following losing 1.52% at the lowest of the session. Same trend in New York, where the Dow Jones and the Nasdaq Composite both drop around 0.6%.
In the United States, retail sales rose 0.7% last month, beating consensus expectations of 0.4%. Excluding automobiles, the most volatile data in this statistic, they even increased by 1%, beyond the +0.4 expected. A good statistic, according to Capital Economics: “ The 0.7% month-on-month jump in retail sales in July shows that monetary policy tightening is still having little impact on real economic activity, but that’s not necessarily a problem for the Fed then. that most indicators continue to point to a slowdown in inflationary pressures “. Not enough to revive, therefore, fears of a turn of the screw in September.
But operators are worried regarding the firmness of bond yields, the 10-year one making a new push to 4.17%, the very one who had worried a few weeks ago. Before the retail sales announcement, it even peaked at over 4.23%. This weighed down, in Paris, on stocks exposed to the United States, whether indebted or growing, such as the operator of shopping malls Unibail-Rodamco-Westfield (-2%) or the manager of Teleperformance calls (-2.3%). There is no increase in the flagship index.
70 banks on Fitch’s radar
Another cause for concern, the Fitch agency announced that it might be forced to lower the credit rating of dozens of banks, including JPMorgan (-2.3%), if it were to reduce that of the sector more overall, from AA- to A+. “ If we were to move this rating to A+, it would recalibrate all of our financial metrics and would likely result in rating downgrades for the institutions we cover. “Explained Chris Wolfe, analyst at Fitch Ratings, in an interview with CNBC, a total of 70 banks.
Last week, Moody’s downgraded 10 small and medium-sized banks and warned that further downgrades might come at 17 more, including bigger institutions like Truist Financial Corp and US Bancorp.
China lowers one-year lending rate
The mood was also weighed down by disappointing new figures from China. In July, retail sales and July industrial production came in below expectations. The former, which is a good barometer of household consumption, rose only 2.5% year on year last month, official data from the National Bureau of Statistics shows. They are completely contrary to the expectations of the Bloomberg consensus, which was aiming for an acceleration to 3.6% following June’s 3.1%.
This figure confirms the current reluctance of the Chinese, who have seen their confidence in the economy undermined by the real estate crisis and prefer to save than to consume. Demand for loans is at its weakest level since 2009, which largely explains the central bank’s decision to cut its benchmark rate for one-year loans to financial institutions this morning by 2 .65 to 2.5%, which should encourage them to grant loans on more favorable terms by reducing their financing costs. Industrial production was also weaker than expected in July, up 3.7% year on year, compared to 4.4% in June and 4% expected by economists. In Paris, the steelmaker ArcelorMittal lost 1.8%.
It “won’t be enough”
For Ipek Ozkardeskaya, from Swissquote, “ The People’s Bank of China’s surprise rate cut will do little to reverse the lack of appetite for Chinese investment as significant fiscal stimulus becomes necessary to stem the bleeding “. Foreign investment in the country has fallen to its lowest level since 1998.
Similar concern for Jean-Jacques Netter, of Gavekal Dragonomics, who returns to the difficulties of the real estate sector: “ Lowering interest rates alone will not be enough to stabilize growth (…) The biggest worry is the real estate sector, where the recession continues unabated. Sales improved slightly year-on-year, but fell to 60% of the 2019 seasonally adjusted average in July from 63% in June. New construction projects were only 37% of the 2019 level (…) The deterioration of the real estate sector risks aggravating the deflationary shock on the rest of the economy. »
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