(BFM Bourse) – The Paris Stock Exchange knows how to welcome good news. Without guidance until 2:30 pm, the CAC 40 immediately rebounded to 6,500 points in reaction to lower-than-expected inflation numbers in the US in July.
Amazingly, as of early afternoon, the Paris Stock Exchange accelerated upwards after announcing slowing inflation in the US in July. The CAC 40 almost erased its losses from the previous day (-0.53%), thanks to a gain of 0.52%, to close at 6523.44 points after the intraday high at 6545.64 points (+0.84%). The Paris index’s rebound would have been even stronger had Sanofi been no longer more than 8.2%, still struggling after halting recruitment for trials of its MS drug.
Convinced that peak inflation has passed, markets are now hoping the Fed will be tempted to soften its stance on its key rates at its September monetary policy meeting.
On Wall Street, the wait-and-see attitude gave way to euphoria, as major indicators rebounded in unison the day after a tough session after warnings about back-to-back sales from semiconductor manufacturers. At the close of European stock markets, the Dow Jones rose 1.70%, the S&P 500 rose 1.9%, and the Nasdaq – more sensitive to the direction of interest rates – rebounded 2.5%.
Inflation slowed more than expected in July in the US, as lower pump prices dampened overall price growth. Against all expectations, consumer prices remained stable between June and July as the consensus was betting a 0.2% rise in one month. On an annual basis, inflation slowed to 8.5% versus an 8.7% increase in prices markets had expected. Joe Biden on Wednesday hailed “signals that inflation may be beginning to moderate” after a 40-year high of 9.1% last June. “Today we learned that our economy inflation hit 0% in July,” even Joe Biden rejoiced.
Adjusted for food and energy prices, the core price index rose 0.3% last month and on an annualized basis, rising 5.9%, as in June when investors feared a rise to 6.1%.
Once the stats were released, the probability of the Federal Reserve raising interest rates dropped by 0.75 percentage points in September to 34% from around 70% on Tuesday. The market is now betting a half percentage point higher after the next Federal Reserve meeting scheduled for September. The US currency gave strength, and the European currency was trading at $1.0341 (+1.24%).
On the business front, news is still scarce. Eutelsat gained 3.9% with shipping company CMA CGM announcing on August 5 that it had crossed the threshold of 5% of the share capital and voting rights of Eutelsat, and it owns 5.03% of the French satellite operator.
But the prize for the day’s biggest increase goes to Alstom (+6.1%), followed by Atos (+5.1%) and SMCP (4.8%).
EDF ended slightly 0.2% lower, the energy company today filed a lawsuit with the Council of State, claiming compensation, an amount estimated to date at 8.34 billion euros, with the Ministry of Foreign Affairs.
At the bottom of the CAC, Sanofi (-8.2%) continues to be penalized with a worldwide recruitment suspension for trials with tolebrutinib in multiple sclerosis.
Bogolat ended the session on a balanced note, as the DuxSphere-based conglomerate posted 34% growth in the first quarter of the 2022-2023 fiscal year, thanks to consumer appetite for wood power equipment and market renovation.
Oil prices are still in a downtrend, affected by a possible return of Iranian crude to the market with the negotiation of the nuclear deal and the announcement of an increase in US inventories last week. The price of a barrel of Brent oil from the North Sea fell 1% to $95.58, while West Texas Intermediate crude lost 0.9% to $89.85.
Sabrina Sadgui – © 2022 BFM Bourse