A new drop in Cac 40, the French budget shift caused by Brussels

The Paris Stock Exchange reversed course this Wednesday after gaining 1.67% over the previous two sessions. At mid-session, the Cac 40 lost 0.6% to 7,581.8 points. Activity is limited to around 630 million euros in index values, due to the absence of American investors for “Juneteenth”, which commemorates the emancipation of slaves in the United States.

The announcement was expected as the European Commission cleared the way for an excessive deficit procedure against France and six other EU states for exceeding the budget deficit ceiling of 3% of GDP set by European legislation last year. A situation that the country already experienced between 2009 and 2018, but which, with the formation of a new government and the National Assembly, takes on a completely new dimension within a few weeks. The costly programs of the National Assembly, which is favored to win parliamentary elections, and the left-wing alliance could prevent France from rectifying the situation while it is already in the crosshairs of rating agencies.

The BoE could bounce back at the end of the summer

In the UK, the annual consumer price index reached the 2% target set by the Bank of England in May for the first time since July 2021. A slowdown of three tenths in line with expectations. However, services inflation, closely watched by the BoE due to its dominance in the UK economy, came in higher than expected at 5.7%. The central bank, which is expected to hold its key rate at 5.25% at its meeting tomorrow, has previously said that a return to target inflation is not enough on its own to start a new phase of its monetary cycle. ” Inflation may return to 2%, but may not stay there for long, said Zara Nokes, an analyst at JPMorgan Asset Management. Services inflation is still too high » and the looming election on July 4 should deter the Bank of England prematurely.

Money markets now put the likelihood of a cut in August at 30%, compared with 45% before the data was released. For State Street Global Markets, the September meeting seems like a good time to relax. Investors also see the US Federal Reserve moving towards easing at the moment.

Paris rating animated by analysts

After a slight improvement seen in inflation, weak May retail sales figures again argue for the Fed to cut rates. But all central bankers speaking at various events yesterday reiterated that more evidence of slowing inflation was needed. At 3.3% for one year in May, it is still too far from the target. ” I will need to observe a period of favorable inflation, softening demand and expanding supply before I am convinced that a reduction in the target range for the federal funds rate is appropriate. said Alberto Musalem, the new head of the Saint-Louis Fed. These conditions can take months and more likely quarters to fulfill. »

On the value side, Dassault Systèmes shows the biggest decline in Cac 40 (-2.8%), a fault of Exane BNP Paribas’ “underperform” move, until then “neutral”. Accor added 2.2%, Barclays analysts raised their recommendation from “online weight” to “overweight” and Getlink, up 1.9%, benefits from UBS being a buyer compared to “neutral” previously.

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