The climate on Thursday on the New York Stock Exchange remains difficult, where markets are digesting the “hawk” of the ECB’s announcements and nervously await inflation in the US in May, hoping to begin to stabilize price growth. Interest rates are rising on both sides of the Atlantic, expecting higher rates from the ECB and the Fed in the coming months.
Two hours after closing, the Dow Jones fell 0.45% to 32,763 points, while the broad S&P 500 fell 0.7% to 4,087 points and the Nasdaq Composite, rich in technology and biotech stocks, fell 0. 99% to 11,966 points.
Earlier in the day, European markets ended in half, the Euro Stoxx 50 fell 1.7%, the DAX 30 lost 1.7% in Frankfurt, while in Paris the CAC 40 fell 1.4%. In Asia, the Nikkei remained stable (+ 0.04%) in Tokyo, while in China the Shanghai composite fell 0.76%.
Following a long-awaited monetary policy meeting, the European Central Bank announced the planned completion of its APP asset purchase program in late June. He also said he would raise his deposit rate (-0.5% on Thursday) by 25 basis points in July. The central bank also said it would raise rates by another 25 or even 50 basis points in September, depending on changes in inflation and expectations.
ECB President Christine Lagarde said that the rate increase planned for September will be more than 25 basis points, if the inflation forecast for 2024 is 2.1% or higher.
The ECB is raising the tone on inflation
The ECB has significantly raised its inflation forecast and at the same time lowered its expectations for growth in the euro area. Christine Lagarde said that “the risks associated with the inflation forecast are growing” and that “rising prices are becoming common to all sectors. The war in Ukraine and the pandemic in China have clearly exacerbated supply difficulties,” she added.
The ECB now expects inflation in the eurozone to average 6.8% this year, up from a 5.1% forecast in March. The forecast for 2023 is adjusted to 3.5%, and for 2024 – to 2.1%. As for GDP growth in the euro area, it is now expected that this year it will be 2.8% (against + 3.7% earlier), then 2.1% in 2023 and 2.1% in 2024.
In the United States, the Fed will meet next Tuesday and Wednesday, and is expected to raise its main key rate, the Fed rate, by half a point to bring it in the range of 1.25% -1.50%. The US Federal Reserve recently said it was ready for at least another half-point increase in July and possibly again in September if inflation shows no clear signs. Slowing down until then …
Already on Tuesday, the Reserve Bank of Australia (RBA) unexpectedly raised the key rate by 50 basis points (up to 0.85%), saying that inflation has risen significantly and should continue to rise.
10-year T-bonds above 3%, German Bund at 1.43%
In this context, the publication of the consumer price index for May in the US this Friday will be the most popular indicator of the week. Consensus of economists expects that price growth will stabilize at 8.2% or 8.3% in May for one year after 8.3% in April and 8.5% in March.
In the bond markets on Thursday, yields rose sharply again: the yield on 10-year IGLBs rose by 1 basis point to 3.03%, while the rate on 2-year IGLBs rose by 3 basis points. up to 2.81%.
In the eurozone, the yield of the 10-year-old German fund jumped by 8 basis points to 1.43%, returning to its highest level since April 2014, more than 8 years ago! It will be recalled that at the end of December 2021, the German “10-year-old” was in negative territory at -0.18%, and the American “10-year-old” was at 1.5%.
In the foreign exchange market, the dollar index rose 0.56% on Thursday night to 103.11 points against a basket of reference currencies, while the euro fell 0.68% to $ 1.0641 after the ECB meeting. Gold fell 0.2% to $ 1852.80 an ounce on the August Comex contract. On Thursday night, bitcoin rose 0.3% to $ 30,287 in 24 hours.
Oil markets are holding time on Thursday, remaining at a high level, above $ 120 per barrel. A barrel of American light crude oil WTI (July futures contract) on the Nymex fell 0.3% to $ 121.72, while the August maturity of Brent in the North Sea fell 0.2% to $ 123.35 on the ICE.
The decision on customs duties imposed on China has not been made
U.S. economic news on Thursday is limited, with a consumer price index expected on Friday, as well as a consumer sentiment index at the University of Michigan on Friday. According to the US Department of Labor on Thursday, weekly unemployment claims were slightly higher than expected last week, at 229,000 compared to 205,000 according to the FactSet consensus.
US Treasury Secretary Janet Yellen, hearing in the House of Representatives on Wednesday, said the Biden administration was still considering changing or abolishing customs duties imposed on Chinese products under Donald Trump, which expires next month.
A decision on the matter has not yet been made, but she said it was “being studied and scrutinized.” Reducing or abolishing some of these taxes could help slow inflation, but the finance minister was skeptical. I don’t think that pricing is a panacea when it comes to inflation, with goods accounting for only a third of Americans’ consumption and two-thirds of services.
Events in China related to Covid have puzzled markets, and the momentum for recovery has threatened to close the southwestern part of Shanghai and restore restrictions in other parts of the city for mass testing. This news surpassed the best trade data from China: a trade surplus in May was announced this morning at $ 78.8 billion against the FactSet consensus at $ 53 billion.
VALUES TO BE HEALED
Citigroup (-1%) would receive proposals from several groups for its Mexican division, according to Bloomberg. Citing people familiar with the negotiations, the article reports that Grupo Financiero Banorte, Banco Santander, Grupo Financiero Inbursa, German Larrea, owner of Grupo Mexico, and Banca Mifel have submitted proposals for Citibanamex worth $ 4 billion to $ 8 billion. .
Twitter (-1%) is considering a shareholder vote on the deal with Elon Musk in early August, according to Reuters. In addition, as the Washington Post points out, the social network has finally agreed to share with Mask the data needed by the latter to assess the scale of bots and fake accounts on the platform. Earlier, the billionaire threatened to abandon his initial offer of 44 billion dollars if the group does not provide him with the necessary information.
Therefore, Twitter expects shareholders to vote on the “Mask deal”, probably in early August, as the group continues to “constructively” work to conclude an agreement with the richest man in the world, said on Wednesday the leaders of social media companies for employees. Mask’s lawyers warned Twitter on Monday that it could cancel the purchase if the company did not provide the spam and fake accounts it was looking for. Twitter has said it continues to share information with Mask. Part of this data is a set that contains all the tweets of the platform, analyzed by various parameters, such as user devices or profiles of accounts that publish tweets, according to people familiar with this issue, referred to by Reuters.
Tesla grew 4% on Wall Street, while Ilona Mask’s group sold 32,165 electric vehicles made in China in May, according to the CPCA (China Automobile Association), including 22,340 units for export. This compares with 1,152 cars sold (excluding exports) in April. The Tesla plant has suspended work for 22 days since the end of March to maintain a citywide “blockade” in Shanghai due to Covid-19. The plant, which manufactures the Model 3s and Model Ys, reopened on April 19 and resumed exports on May 11.
Nio (-7%), on the other hand, settled on Wall Street, while Chinese electric car maker listed in the US market, however, suffered losses in the first quarter that were lower than expected and revenue exceeded market expectations. Declining gross margins are a matter of concern in markets, although financial prospects in other countries are mixed due to continued supply and supply chain volatility and the recent resumption of COVID-19 in China. Adjusted quarterly net loss was 1.31 billion yuan, about $ 207 million. Car sales reached 9.24 billion yuan (US $ 1.46 billion), up 25% from a year earlier and 0.3% consecutively. Margins on vehicles fell to 18.1% from 21.2% a year earlier.
Bilibili (-11%), a Chinese video-sharing group registered on Wall Street, is being promoted. The group has just reported deeper quarterly losses, higher than expected, and lower-than-expected revenue. The group discusses the unexpected revival of Covid in China and the conditions of imprisonment. Thus, in the last quarter, net loss rose to 2.3 billion yuan, or about 342 million dollars, compared to 904 million yuan a year earlier. Excluding articles, the adjusted loss per share was 4.2 yuan from 2.5 yuan a year earlier. Revenues still rose 29.6% to 5.05 billion yuan.
Target (stable), American discount retailer Walmart, which warned about its profits earlier this week, has just surprised by deciding to increase its dividends by 20%! Therefore, the group’s board of directors announced quarterly dividends of $ 1.08 per ordinary share compared to 90 cents earlier. Extended dividends are payable to shareholders on September 10 following August 17. This third-quarter dividend will be the 220th in a row paid by the retailer since October 1967 and its IPO. This is also the 51st consecutive increase in dividends for the group …
Amazon (-1%) will continue to implement ambitious projects, despite market conditions, explains Bloomberg. In an interview, Amazon CEO Andy Jesse said that the slowdown in online sales and the prospect of a recession will not prevent companies from investing more in big bets, such as building a grocery network, launching satellites that broadcast the channel. Internet, Alexa software and its subsidiary Zoox. Jassi is confident in the prospects of Amazon’s streaming video business, noting that some of the assets of its newly acquired Metro-Goldwyn-Mayer studio will blend in very well with what the company is doing in the entertainment industry.
On another topic, Jassey clarifies that there are still many problems in the global supply chain that will not improve in the near future. According to the head, Amazon places orders with suppliers much earlier than before, and is working to gain access to more ports.
Alibaba (-4%) stumbles on Wall Street, while Ant Group denies plans to go public. However, Chinese authorities have given billionaire Jack Ma’s group temporary permission to resume its implementation plan in Shanghai and Hong Kong, two sources familiar with the matter told Reuters on Thursday.