The Paris Stock Exchange closed down sharply 2.21% on Wednesday, fearing new Western sanctions against Russia and a recession in the US economy with the prospect of a severe tightening of monetary policy by the Federal Reserve.
The CAC 40 star index lost 146.68 points to 6,498.83 points. On Tuesday it had already fallen by 1.28%.
Throughout the day, the Parisian rating extended its losses, slowly but surely, losing up to 3% shortly after 4:00 p.m. compared to the previous day’s close.
Investors were still digesting tougher-than-expected comments from Federal Reserve Governor Lael Brainard on Tuesday, who is known for his dovish stances on monetary policy.
He assured that the Fed is ready to “act more strongly” against inflation, in particular through the sale of financial assets, at its next monetary meeting in May.
The speech weighed on financial markets because “if monetary tightening is too aggressive, it can have a devastating effect on the US economy,” says Philippe Cohen, a portfolio manager at Kiplink Finance.
He clarifies however: “The Fed throws test balls in its speech but I don’t think it will be so severe when it comes to the act.”
The hypothesis of a reduction in the Fed’s balance sheet at its next monetary policy meeting in early May is in any case “credible” according to the director.
Second factor of decline, possible new sanctions against Russia, “which return with a boomerang effect and complicated consequences for the European economy”, underlines Philippe Cohen, portfolio manager at Kiplink Finance.
The European Union will have to take sanctions on Russian oil and gas “sooner or later”, declared the president of the European Council, while the Twenty-seven are currently discussing new sanctions on coal and investments in the country.
The United States, for its part, has announced a new round of economic and financial sanctions against the big banks and the sons of Vladimir Putin. The UK has also tightened its measures, banning all investment and targeting the banking and energy sectors.
Finally, the French presidential election “adds a bit of fever to the French market”, observes Philippe Cohen. “The latest polls for the second round of the presidential elections show an increasingly narrow gap between Emmanuel Macron and Marine Le Pen” and a possible victory for the National Grouping candidate within the margin of error.
Distressed industrial companies
In the Parisian market, the values of companies dependent on economic growth, such as industrials, have suffered.
Technology companies have also recorded losses due to the rise in interest rates, which penalizes their ability to finance their growth.