Cac 40: After the US employment figures, the Paris stock exchange is betting on a new Fed interest rate hike

(BFM Bourse) – The Paris Stock Exchange ended the week down 0.6%, reacting to an unexpected rebound in job creation in the United States. Across the Atlantic, the excellent health of the labor market bodes well for an even tighter Federal Reserve stance on interest rates. Despite everything, the CAC 40 recorded a positive weekly performance.

In normal times, an improvement in the labor market in the United States would have been welcome. But the operators, burned from the day’s big meeting, were still convinced of the Fed’s moderation in managing its monetary policy. Hopes are all but dashed as investors now expect another three-quarters-of-a-point rate hike at the September meeting.

The CAC 40 closes this last session of the week down 0.63% to 6,472.35 points after losing almost 1% (-0.95% to 6,449.72 points the day’s low) in reaction to this jobs report. On a weekly basis, the balance is positive, the Paris rating remains in the green for a fifth week (+0.37%).

A vibrant US job market

The health of the labor market in the world’s largest economy looks good. 528,000 jobs were added in July, while analysts expected 250,000 new hires. The June tally was also revised to 398,000 from a previously estimated 372,000. For its part, the unemployment rate fell by 0.1 point to 3.5%, returning to pre-pandemic levels. The average hourly wage increased by 0.5% in one month, ie a 5.2% increase in hourly earnings in one year due to the labor shortage. Inflation looks to be confirmed, which should prompt the Fed to continue its move toward monetary normalization if inflation doesn’t ease. On the subject, the testimony of Loretta Mester of the Federal Reserve Office in Cleveland leaves no doubt as to the position favored by Fed officials. It suggests that a pause in rate hikes may not materialize until the second half of 2023.

According to CME Group futures calculations, the probability of another 0.75% rate hike in September is estimated at almost 70%, up from 34% the day before. Expectations of an imminent tightening of monetary policy were also reflected in the bond markets. The 10-year US bond yield was 2.858%, while the 2-year bond yield rose to 3.252%.

Sensitive to rate hikes, Teleperformance was down 6.25% at the close on Friday. On the other hand, banks such as Crédit Agricole (+2%), BNP Paribas (+1.1%), Axa (+1.5%) withdrew from the game, while Société Générale posted a symbolic gain of 0.02% recorded.

Publicis fell 2.6% in the wake of British advertising giant WPP, whose half-year results were sanctioned in London.

Rothschild & Co limited its losses to 5.2%, the financial institution suffered a sharp fall in profits in the first half as its investing activity and personal debt weighed on the accounts.

Although oil prices rose on Friday, they are still trading at pre-Russian invasion levels on fears of a slowing global economy. A barrel of Brent rose 1.8% to $95.79, while WTI was up 1.7% to $89.59.