(BFM Bourse) – In the wake of the bright red close of the American indices, the Paris market started to fall again on Wednesday, penalized by the restrictive comments of a Fed official, the new sanctions to come against Russia and growing uncertainty about the outcome of the presidential election in France.
In slight decline at the opening of trade on Wednesday the day after a decline of 1.28%, the CAC 40 widened its initial losses in the morning and fell 1.81% to 6,525 points around 1:20 p.m., a level that would correspond to a 3-week low at the close. “There are far too many uncertainties in the market”, summarize the Saxo Bank analysts in their morning note. Investors are particularly concerned about “the imminence of new sanctions against Moscow which could include, for the first time, an energy component” notes John Plassard, deputy director of investments at Mirabaud. “The more ‘hawkish’ tone of certain members of the Fed is also an argument which explains the trend of the day” he adds.
On Wall Street on Tuesday, the session was indeed “dominated by comments from Fed Governor Lael Brainard, who set fire to the powder on the stock and bond markets with very restrictive comments” points out Jeffrey Halley, analyst at Oanda. “Lael Brainard hinted that a reduction in the Fed’s balance sheet, called quantitative tightening, could begin as early as next month and at a much faster pace than previous efforts. She further hinted that a rate hike of 0.50% was on the table as the Fed was prepared to take “strong action” to contain inflationary pressures. What makes the comments tonight so important is that Ms Brainard is usually one of the most “dovish” (accommodating) members of the FOMC (the “Federalopen market” of the Fed). If it has switched from the camp of the “doves” to that of the “hawks” (restrictive), the markets must take note and that is what they have done” develops the expert.
The markets also remain attentive to the introduction of additional sanctions against Russia, in the context of the war in Ukraine. The European Commission proposed on Tuesday that the 27 countries of the Union cease their purchases of Russian coal, which represents 45% of EU imports, and that they close their ports to ships operated by Russians. The European Union will have to take sanctions on Russian oil and gas “sooner or later”, also declared Wednesday the President of the European Council Charles Michel.
The narrowing gap between Macron and Le Pen
The trend in Paris on Wednesday is also weighed down by a slight but growing fear concerning the outcome of the French presidential election, the first round of which takes place on Sunday. The negative orientation of the market “thus reflects the integration of risk premiums”, with the gap which is narrowing in the second round polls between the two favorites Emmanuel Macron and Marine Le Pen, believe analysts at Banque Postale AM .
While macroeconomic uncertainties are on the increase, a dead calm still reigns at the microeconomic level, a few days before the launch (Tuesday), for LVMHof a new season of quarterly results, where operators will scrutinize in particular the prospects of the flagships of the French coast in a degraded context.
In the meantime and like the day before, we find several automotive and banking stocks among the biggest drops in the flagship index at midday (-4.7% for Stellantis-3.6% for Societe Generale-3.3% for BNP-3% for Renault). Saint Gobain (-4.2%) and STMicro (-3.5%) also accelerated their fall. And on the other side, rare are the values to float (+2.6% for Carrefour, +1.7% for Eurofins).
EDF, for its part, sells 2.8% after having completed its capital increase of more than 3.1 billion euros – including 2.7 billion provided by the State – with an operation oversubscribed by nearly 130%.
Among the rare news of the day, the medical diagnostic specialist Eurobio Scientific confirms its change of dimension observed in 2020 with the publication of annual results close to those of the previous year, but down 5.6%.
In terms of oil, prices rose slightly (+1.1% to 107.2 dollars for the Brent) as the EU prepares to break the “energy taboo” with its upcoming embargo on Russian coal. On the currency market, the single currency temporarily puts an end to its violent fall in recent sessions against the greenback (more than 2% sold over the last 4 days) and thus trades at 1.0907 dollars, i.e. a level unchanged from the day before.
Quentin Soubranne – ©2022 BFM Bourse