(BFM Bourse) – The day after falling 1.84%, the fall of the Paris Stock Exchange accelerated on Friday, the CAC 40 shed another 4.97%, the biggest daily drop since March 18, 2020 in the face of escalation. war in Ukraine and the consequences for the global economy.
The decline is starting to get dizzying, and now you need to zoom out a lot to see how much the flagship Paris market index drops to session after session. After shedding 1.84% on Thursday, to its lowest level since the end of July last year, the CAC 40 dropped 4.97% this Friday to 6061.77 points, a level not seen since March 29, 2021, almost a year.
For the entire week that began with a 3.94% drop, the Paris Stock Exchange barometer fell 10.23%, its worst weekly reading since March 2020, the period when the first restrictions were linked to Covid.
The CAC 40, as well as all European stock markets (-4.4% for the Dax in Frankfurt and -3.2% for the “Footsie” in London this Friday) and, to a lesser extent, the New York indices, are subject to iron determination, shown by Vladimir. Putin. Indeed, it now seems clear that the Kremlin wants to accelerate its takeover of Ukraine, despite the human and economic losses. “Given the violence of the intervention, the loss of life, the outcome that this war is causing, it is difficult to see how Russia can, over time, bring peace to a country with the kind of hostility that Russian authorities create in an oppressed population.”
In addition, the economic sanctions that Russia is already undertaking are likely to begin to put pressure on its population more than ever, potentially destabilizing power in the Kremlin,” said Sebastian Paris Horwitz, director of research at La Banque Postale Asset Management. “In any case, in the very short term, uncertainty over the supply of energy to the global economy and other commodities in which Russia plays an important role continues to be of great concern and makes it difficult to restore calm to the markets.”
Commodity war tensions are fueling fears of a larger-than-expected weakening of the global economy, which is beginning to lead to downward revisions to growth forecasts. Apart from Russia, Europe appears to be the most vulnerable region due to energy supply constraints.
Although the impact of the conflict on GDP growth is still difficult to determine, most economists agree that it should spur inflation. “Allianz and several major international banks are predicting that inflation could increase by one percentage point over the current year solely due to the war and its aftermath,” said William Gerlach, head of international payments for iBanFirst in the French market. The rebound in inflation is linked to a jump in the price of a barrel of oil, growing bottlenecks in international trade and supply chain disruption (German factories are already closed due to a lack of supplies from Ukraine) and a recovery in the price of agricultural raw materials, he explains (for example, a tonne of wheat rose by almost 30 % for five days).
In this context, the European Central Bank faces the risk of stagflation, i.e. weak growth accompanied by high inflation. “We would not be surprised if inflation in the Eurozone reaches a high level of close to 7% this year. Under these conditions, the question is no longer whether inflation is temporary or not. We just have to act,” adds Willam Gerlach. “Contrary to the general consensus that the war in Ukraine will push back the first ECB rate hike to 2023, we expect this to happen as early as the fourth quarter of 2022.”
Societe Generale and Alstom fail
Unsurprisingly, the ranking of values is similar to benchmark indexes: bright red. In the CAC, only Thales escaped (again) the purge, as weaponry was popular in wartime. In addition to the electronics and security group, 39 other stocks in the core sample saw losses of at least 1.4% (Eurofins) and up to 10% for Societe Generale, exposed to Russia. Just like Alstom, which is still down 9% and has fallen to its lowest since 2016, valued at just 7 billion euros (-39% since January 1st).
The fiasco does not spare many, and Veolia (-8.3%), Worldline (-8.3%), ArcelorMittal (-8.1%), URW (-7.6%), Stellantis (-7.6%) , Kering (-7.6%). %), Airbus (-7.5%) or Crédit Agricole (-7.3%), to name but a few, also suffered significant losses.
Worse, of the 128 listed SRD-eligible stocks, only three closed positive this Friday (+2.5% for Schlumberger and +1.3% for Tarkett, the latest being Thales). In the other direction, electrical equipment supplier Rexel (-11.6%), credit insurance specialist Coface (-11.2%) or outdoor advertising giant JCDecaux (-9.6%) are spinning off without much urgency.
In business news, Dassault Aviation has released a sharply rising annual report with an exceptional 100 aircraft orders in 2021 and new mega orders in line. The name limits its decline to 0.7%. Vegetable heavyweight Bonduelle, for its part, posted solid half-year results for the year and reaffirmed its full-year targets despite uncertainty about the development of its operations in Russia. Among the smallest numbers, autonomous vehicle specialist Navya received 0.4% after announcing a contract awarded by the Jacksonville, Florida City Transportation Authority to its local partner, Beep.
Oil stays on track, euro at two-year low against dollar
After a morning wait amid a possible Iranian nuclear deal, oil prices rise again on Friday afternoon amid fears of Russian supply disruptions, and sanctions against Moscow are steadily tightening. Around 18:30, a barrel of Brent added 2.8% to $113.6.
Finally, in the foreign exchange market, the single currency continued to depreciate against the US dollar, whose safe haven takes on full importance as the European currency suffers from the proximity of the armed conflict in Ukraine. Thus, the euro lost 1.32% against the US dollar to $1.0922, falling below the $1.10 threshold for the first time since May 2020. The dollar increased its growth after the publication of data on unemployment in the US better than expected, which may confirm the desire of the Fed to raise rates.
Quentin Subrann – © 2022 BFM Bourse