(Paris) Stock markets fell sharply on Friday after the announcement of much stronger inflation than expected in the United States, where it could cause a tightening of monetary conditions with further rate hikes.
Wall Street was moving down sharply: around 11:50 a.m. (Eastern time), the Dow Jones fell 0.91%. Heading into their worst week since December, the S&P 500 was down 1.03% and the NASDAQ 1.55%.
In Europe, after a rising opening, the indices ended clearly in the red: Paris lost 1.78%, Frankfurt 1.72%, Milan 1.07% and London 0.37%.
Inflation has risen again over one year in the United States, according to the PCE index, favored by the American Federal Reserve (Fed). Prices rose 5.4% in January from a year earlier, still far from the institution’s 2% target.
More significantly for investors, this figure is significantly higher than their forecasts, which were around 4.9%.
These figures “reinforce the bets on increases in the key rates of the Fed during the next three meetings”, writes Edward Moya, analyst of Oanda. Especially since “the American consumer still seems to be in good shape”, judging according to him by the sharp increase in income and expenditure published in the same PCE report.
Raising the key rate is the main tool used by central bankers to try to control inflation, at the cost of slowing down economic activity.
“Investors are gradually coming out of denial,” notes Benoit Gérard, of Natixis IM. They are now forecasting stronger monetary tightening than a few weeks ago, more in line with statements by central bankers.
On the bond market, rates rose in Europe and the United States, especially those for short maturities, which are the most sensitive to central bank policies.
In Europe, the change in Germany’s Gross Domestic Product in the fourth quarter of 2022 has been revised downwards, to -0.4%.
Error 787 for Boeing
Boeing lost 4.85%, after the announcement of a new suspension of the delivery of its long-haul 787 aircraft – already interrupted for several months in 2021 and 2022 for poor workmanship -, according to the American agency supervising aviation.
Decline in technology
The shares of technology companies, sensitive to financing conditions, because the cost of money reduces the outlook for results and therefore the valuation of their stock market price, based on their growth, fell sharply.
The NASDAQ megacaps lost around 2%, from Amazon to Apple via Meta and Microsoft. Tesla dropped 3.33%, Nvidia 1.95%.
Acid ads for BASF
The German chemical giant BASF, hit hard by rising energy costs, will close several production units on its historic site and cut a total of 3,300 jobs worldwide. The company will end its share buyback program launched in January for 3 billion euros and consumed half since. The stock fell 7.86%.
Commodities and Currencies
Oil prices rose around 11:30 a.m. (Eastern time), a barrel of Brent from the North Sea for delivery in April gained 0.65% to 82.75 dollars and that of American WTI at the same maturity 0, 77% at $75.97.
The price of European natural gas was stable at 50.70 euros per megawatt hour.
In the forex market, the dollar was strengthening against other major currencies around 11:30 a.m. EST. The euro fell 0.43% to 1.0550 dollars. The pound yielded 0.61% to 1.1940 dollars.
The yen fell 1.20% against the dollar, to 136.31 yen to the dollar. The next governor-designate of the Bank of Japan, Kazuo Ueda, has taken a stand in favor of continuing the ultra-accommodative monetary policy in place for 10 years. It also pushed the Tokyo Stock Exchange up 1.29%.
Bitcoin fell 2.75% to $23,220.