Cac 40: Vladimir Putin’s Determination Brings Markets Down

(BFM Exchange) – Close to equilibrium before the start of the day, CAC 40 fluctuated again late in the session as investors learned about the content of the swap between Emmanuel Macron and Vladimir Putin. The French President believes that “the worst is yet to come” and his Russian counterpart expressed “great determination” to continue the offensive.

You definitely need to be strapped in to navigate these particularly turbulent markets since the start of the Russian offensive into Ukraine on the night of Feb. 23-24. While it had already cut its bounce significantly late Wednesday (+1.59% at the close), the Paris market tried to bounce back in the right direction early in the session on Thursday and then again early in the day. , but this desire once again ran into an increasingly disturbing geopolitical reality.

If now new Russian-Ukrainian negotiations are underway on the Belarusian-Polish border, their outcome, unfortunately, is hardly in doubt, and Russia remains on its positions. “The worst is yet to come,” Emmanuel Macron indeed reasoned at the end of a 1:30 a.m. phone call with the Kremlin boss, who expressed “very great determination” to keep the invasion on track, according to a press release from the Elysee Palace. . Vladimir Puuten really confirmed to his French colleague that the operation of the Russian army is developing “according to the plan” outlined by Moscow, and that it will be “worse” if the Ukrainians do not accept its conditions, know it – complete surrender. Faced with such hostility, the French presidency reaffirmed its intention to “further tighten sanctions” against Russia, believing that this is “a very powerful tool, as we see from the collapse of the ruble.”

These announcements added to the nervousness of the markets, causing another sharp decline in the flagship tricolor rating index. Thus, CAC 40 closed the session with a drop of 1.84% to 6,378.37 points, with trading volume still higher than usual, but slightly lower than in recent sessions (5.1 billion euros).

Energy crisis lurks and fuels volatility

“Stock volatility, especially in Europe, has reached a high level, which logically reflects the tensions associated with an all-out Russian invasion of Ukraine, an event that seemed unlikely back in early February,” notes Nadezh Dufosse, “Multi-Active” manager of Candriam. But absolute volatility has not yet reached the peaks seen during previous major crises, “which would be a capitulation signal in financial markets,” she warns.

The situation is changing very quickly,” the specialist continues. Until this week, it seemed that the markets were counting on a fairly quick resolution of the conflict without a significant impact on our economies. “Now we are at a turning point. On the one hand, the US market is benefiting relatively from falling interest rates and more moderate expectations of a tightening of the Fed’s monetary policy in the short term. stocks that should perform better. On the other hand, we believe that the impact of the sanctions could lead to an energy shock that would affect growth in both Europe and the United States.” For several decades, armed conflicts did not have a lasting and significant impact on the markets, “except when they led to an energy crisis … which is at stake today,” says Nadezh Dufosse.

With a fresh peak near $120 earlier in the morning for Brent, up more than 50% year-to-date, oil prices are indeed reflecting a brewing crisis. Around 6:10 p.m., however, the surge subsides significantly (a barrel of North Sea oil is trading at $113.7, up 0.7%, while WTI is flat from the previous day at $111) .

The whole question is how central banks will react to this factor of accelerating inflation, which has already reached its maximum in forty years. Fed chief Jerome Powell confirmed a rate hike this month to fight inflation, but he also acknowledged that an invasion of Ukraine poses a risk to growth prospects, putting the institution in an unenviable position.

The negative trend was also helped by the publication across the Atlantic of a further slowdown in the growth of activity in the US service sector in February, which continues to be hampered by disruptions in the supply chain and a shortage of qualified personnel. This statistic also affects the New York indices: Nasdaq added 1% at 18:05.

French groups sum up their acquaintance with Russia

One by one, the companies most exposed to Russian influence are revealing what they have to lose. For Engie, this is a €1 billion loan to the company managing the Nord Stream 2 gas pipeline project, the prospects for recovery of which are becoming doubtful, leading to a loss of the title by 6.3%, a red light CAC 40. Renault, the leader of the Russian automotive market, which accounts for nearly 30% of registrations through its AvtoVAZ subsidiary, fell again by 4%. Publicis, the author of an impressive recovery between 2020 and 2021 (nearly 160% overvaluation), suffered from the cyclical component of its activity for three weeks and lost another 6.7%, which is the worst CAC in a day. Danone, which recently indicated that Russia accounts for only 5% of all its revenues (through Prostokvashino, number one in the Russian dairy market and a real cultural symbol in the country!), is 2.7%, while Societe Generale caps the decline to 0.7%. . .

Excluding the flagship Interparfums index, which (like every year) outperformed its annual targets, which were raised several times, nevertheless gained 12.2% due to a decidedly cautious management forecast (like every year). Faurecia’s shares fell 8.5% on worries about global auto production, leading investors to doubt the strategic goals the group announced a few days ago, shortly before Russia’s attack on Ukraine.

However, several stocks stand out favorably, notably Technip Energies (+13.6%), while the group reported 2021 results that beat its targets and expressed confidence in its outlook given its key role in the implementation of technologies related to the needs of independence and energy transformation. On the same topic, GTT is still 6.4% ahead of Thales, very volatile, moving forward again (+3.8%, the strongest CAC gain), while Vallourec benefits from the announcement of two new contracts and holds 5.6%.

Finally, in forex, the Ukrainian conflict continues to benefit the dollar, which is regaining safe haven status. Thus, the single currency lost another 0.63% to $1.1049, its lowest level since June 2020.

Quentin Subrann – © 2022 BFM Bourse