(BFM Stock Exchange) – Up 0.75%, the Paris Stock Exchange closed at 6,257.94 points, its highest level since early June, helped by the recovery in Wall Street indices and the very good response given to the releases the giants of the “tech” alphabet and Microsoft. However, the market has not lost sight of the day’s big meeting with the Fed, whose interest rate decision is expected in the evening.
The Paris Stock Exchange has got off to a good start and has supplanted its small slump from the previous day. The star index in Paris, which hesitated at the opening, accelerated its gains with the recovery of the American indices. The CAC 40 was back up 0.75% Wednesday night to close at 6,257.94 points, a high of nearly two months. The performance of the day thus reduces the Paris index’s loss since January to 12.4%, compared to a more significant drop of 18% at the end of the first half of the year.
A spirit of optimism is also blowing through the indices on Wall Street: the Dow Jones rose by 0.50%, the S&P 500 by 1.4% and the Nasdaq by 2.45% at the European close. Investors praised the results of “tech giants” Microsoft and Alphabet. The macroeconomy was also on board as durable goods orders rose unexpectedly in June from May, according to Commerce Department data released on Wednesday.
The highlight of this new news-rich day is, of course, the US Federal Reserve’s decision on interest rates. In the evening, it will hike interest rates for the fourth time in a bid to dampen inflation in the United States, which peaked at over 9% in more than a year in June. It once again faces a balancing act with the difficult task of controlling price developments without plunging the country into a recession.
A rise of 75 basis points (0.75 percentage points) is now expected by investors, especially since Christopher Waller, one of the Fed’s governors, and St. Louis Fed President James Bullard are two prominent members of the Fed who for an identical increase as in June. In this regard, markets will be focused on President Powell’s message and will be on the lookout for the slightest hint of Fed monetary policy, particularly its next rate hikes, in the coming months.
The US Federal Reserve’s decision on Wednesday will be followed by US GDP for the second quarter on Thursday, with the same indicator for the euro zone expected on Friday, as well as the first inflation estimates for July.
On Tuesday, the International Monetary Fund (IMF) cut its global growth forecast to 3.2% in 2022 from 3.6% in April. The United States is unlikely to escape a recession, said the IMF’s chief economist, who is beyond of the Atlantic no longer expect growth of 2.3% this year.
In Europe, the giant Gazprom has just reduced its gas delivery capacity via the Nord Stream 1 gas pipeline to just 20%, according to the German operator, increasing the risk of shortages in Europe this winter. European Union energy ministers on Tuesday agreed on an agreement to jointly cut their gas consumption to help Germany, which is heavily dependent on Russian blue gold. In addition, the looming gas crisis in Europe and the return of political instability in Italy will push the euro zone into a mild recession by the end of the year and early next, JP Morgan predicted in a note published on Wednesday.
Wordline and Elior on the rebound, shunned Eurofins Scientific after its results
In terms of readings, Wednesday served as a warm-up before a flurry of results is expected on Thursday.
After trading lower in early trade, LVMH closed up 1.7%. The world leader in luxury goods managed to generate a profit of 6.5 billion euros in the first six months of 2022, much better than in 2021. The mixed reception of this excellent publication could be explained by a weaker development in China in the affected second quarter by new health restrictions in the country.
Worldline’s release caused a stir, the electronic payments specialist confirming its annual targets after a significant increase in its half-year results. The action is rewarded with a 13.8% rebound at the close.
Michelin, on the other hand, slipped 6.1% after the tire maker announced a softer first-half net result on Tuesday and downgraded its full-year outlook in a “troubled” environment.
For its part, Eurofins Scientific fell 7.2%, despite better-than-expected half-year results and an upgrade to its full-year targets. Investors would have sanctioned the dynamics of non-Covid activity.
Without the Star Index, Elior wins the award for the strongest rise in the SRD, which is credited with a gain of more than 30%. Driven by the lifting of restrictions related to the health crisis and strong commercial momentum, Elior reports better than expected activity, notably organic growth of 25% for the third quarter of its 2021-2022 financial year. The group confirms its targets for the same financial year and its mid-term ambitions.
On the foreign exchange market, the euro was stable at $1.0115 before the Fed’s interest rate decision. Oil prices accelerated higher, driven by the reduction in Russian gas supplies and a drop in US inventories, with the barrel of Brent rising 2.5% to $106.82, while the US WTI rose 2.15% to $97.59 gained weight
Sabrina Sadgui – ©2022 BFM Stock Exchange