A risky weekend for the financial markets. The proof is that the Paris Stock Exchange is, once again, looking gloomy. The trend remains weakened by the political risk in France, two days before the first round of the legislative elections, and by the publication in the afternoon of a flagship measure on prices in the United States.
At 2:30 p.m., the Labor Department’s Bureau of Statistics will release changes in U.S. household income and consumption in May, as well as the Federal Reserve’s most closely watched measure of inflation. An annual rate of 2.6% is anticipated for the underlying index, a decline of two tenths compared to the previous month. This would then be its lowest level since March 2021. But be careful, “ After the upside inflation surprises in Canada and Australia, if core PCE inflation turns out to be much higher than consensus, this will raise concerns about the global disinflationary trend coming to a halt “, notes Tony Sycamore, analyst at IG.
At mid-session this Friday, the CAC 40 lost 0.38% to 7,502 points, with L’Oréal in the red lantern. The world number one in the cosmetics industry lost nearly 3%, after having already suffered the day before from the comments of its CEO, who, during an event organized by JPMorgan in Paris, revised downwards his growth forecasts for the global beauty market for 2024, bringing them down to 4.5%-5%, against a previous forecast of 5%, because of the stagnation of the Chinese market, reports the Bloomberg agency, citing a spokesperson for the company.
Franco-German spread widens before first round
Outside the leading index, Antin gained 4.9% thanks to Citi’s move from “neutral” to “buy” while Air France-KLM lost 4.5% in reaction to Barclays’ downgrade from “overweight” to “in line weighting”, citing political instability in France.
The spread between the French and German 10-year bond, which measures the risk premium for lending to France rather than to the very safe Germany, has reached its highest level since 2012 at 84 basis points. Several observers have warned that the budget proposals of the left-wing and far-right alliance, respectively second and first in all the polls, could trigger a market crisis “à la Liz Truss” (named after the former British Prime Minister, whose draft mini-budget with unclear financing had panicked the markets and led to her resignation after 45 days, editor’s note).
In the best scenario, without an absolute majority, a technical government would be “cobbled together”, estimates Andrew Kenningham of Capital Economics, where the National Rally and the New Popular Front “ would significantly scale back their programs when faced with the reality of forming a government. And even then, the gap between French and German yields will remain higher than before the dissolution of the National Assembly », continued the chief economist.
A slightly positive opening is emerging on Wall Street. Against the trend, Nike could fall by 14% according to pre-stock exchanges after the publication of a turnover and forecasts lower than analysts’ projections. In the wake of the world leader in sports clothing and equipment, Foot Locker, Under Armor and Lululemon are also expected to decline, like Puma (-2.6%) and JD Sports (-4.1%) in Europe.
