The stock market fears the Fed can’t win the fight against inflation without triggering a recession in the US, Market News

Volatility is the keyword in the stock market right now. This Thursday, Bedroom 40 lost a significant part of yesterday’s gain, closing up 1.01% to 6,206.26 points (-3% near the low of the day). Yesterday’s growth was only possible because at the time of the closing of European markets, US indices were generally on the rise, investors were trying to appreciate the unpleasant surprise of the latest inflation data in the US. Only then did the Dow Jones, S&P 500 and, above all, the Nasdaq Composite of technology stocks close sharply lower (today they are trying to rebound, but again, the session is very nervous).

In the end, the camp of those who fear that, in the final analysis, the peak of inflation may not be behind us won. Yesterday’s US Price Index report, showing stronger-than-expected year-on-year gains, bolstered Fed interest rate expectations and heightened concerns about a hard landing, as the report shows. in the secondary debt market, says Jim Reed, a strategist at Deutsche Bank in London. “Looking at the components of the CPI, what worries the Fed is that there are many signs that inflationary pressures remain broad and cannot be explained by temporary shocks such as a spike in energy prices. »

READ ALSO : As in the Volcker era, the United States will experience a “big recession,” Deutsche Bank warned in late April.

“Sweet”

Since Jerome Powell’s press conference last week, the stock market has already feared that the economic landing will no longer be as soft as it hoped, as the president of the US central bank, engaged in a strong recovery of interest rates to fight inflation, preferred to use the word “soft” , not “soft”, a term used elsewhere this week by John Williams of the New York Fed.

Today eyes were on the second statistic of the week regarding price developments in the United States, this time on producer prices. With the same observation as the day before, for their consumer counterpart. They have calmed down a little from their March peak, but do not inspire confidence in a slowdown. For the year, producer prices rose 11%, less than the 11.2% rise seen in the previous month, but more than the 10.7% expected by consensus. They rose 6.9% in “core” data, that is, excluding volatile elements such as energy and food, against an expected 6.6%. Compared to March, the increase is 0.5% in the published data and 0.6% in the “base”, as expected.

Hermès at a price of less than 1000 euros per share

In this uncertain environment, despite the fact that former Fed Chair Janet Yellen, now Treasury Secretary, said shortly before the Paris Stock Exchange closed that the US central bank could successfully fight inflation without causing a recession, the shares of the most valuable companies in the CAC 40 in relation to their PER (price relative to earnings), namely Hermes, Kering and LVMXare one of the biggest drops of the day. Hermès, whose shares fell more than 5% in the session to below €1,000 per share, hit a yearly low, as did Kering.

Vice versa, STMicroelectronics, which unveiled its new medium-term targets during an investor day today, gained 4% against Cac 40. The chip maker said it is aiming for solid revenue growth while boosting profitability. Its goal is to achieve a turnover of over $20 billion by 2025-2027 with a gross margin of around 50%.

In the foreign exchange market, the euro fell below the $1.04 threshold, its lowest level in more than five years. Yesterday’s statements by Christine Lagarde that the European Central Bank, in turn, will raise the base interest rate in July, do not support the single currency, while the Fed has made significant progress in normalizing its monetary policy.