The dynamic at the start of the year has changed completely, halted in its tracks by the more aggressive orientation of the American Federal Reserve. A turning point that pushes bond yields to new highs, directly affecting technology stocks. On Wall Street, the S&P 500 closed down 1.8% on Tuesday and the Nasdaq Composite 2.6%, weakened by tensions on the interest rate markets and the disappointing results of Goldman Sachs. The yield on the 10-year US bond crossed the 1.87% mark for the first time in two years, while that of the two-year bond settled above 1%, a up 30 basis points since the beginning of the year. Asian markets follow the movement this morning, the Nikkei of the Tokyo Stock Exchange having ended down 2.8%, while the Chinese CSI 300 gave up 0.8 % despite expectations of monetary easing by the country’s central bank.
German 10-year yield in positive territory
The market now seems to have priced in the prospect of four Fed rate hikes this year. Speculation is rife on an initial rise of half a point in March, against a quarter point previously estimated. Beyond the United States, the risk of a slippage in inflation, fueled by tensions on the supply chains and the rise in energy prices, is particularly palpable with UK consumer prices rising 5.4% year on year in December, the highest since March 1992, after 5.1% in November. In Germany, the increase was confirmed at 5.7%. The 10-year Bund yield is trending slightly higher at 0.040%, its first move into positive territory since May 2019. These price tensions are adding pressure around central banks. “If inflation were to prove more persistent, have no doubt that we will have the will and the capacity to adapt our monetary policy more quickly, to ensure a return to our 2% objective”, declared François Villeroy. de Galhau, Governor of the Banque de France and member of the ECB Council, during a conference organized by Dauphine University on Tuesday. The barrel of Brent from the North Sea remains above 88 dollars, at most high for seven years, following the interruption of a pipeline between Iraq and Turkey after an explosion, and tensions in the Middle East. On the corporate front, banks Morgan Stanley and Bank of America will unveil their fourth quarter results before the opening. Procter & Gamble and UnitedHealth Group, both components of the Dow Jones, will do the same, before Intel, present in the three major indices, after the close.
New degradation on EDF
Sanofi announced that a second phase 3 trial evaluating its drug Dupixent (trade name of dupilumab) in adults with uncontrolled nodular prurigo met its primary endpoint and key secondary endpoints.Stellantis. Managing Director Carlos Tavares wants to avoid plant closures in Europe but warns of the impact of the electrification of the automotive sector on the group’s competitiveness, he said in an interview published by Les Echos. Among the analyst ratings, Morgan Stanley raised its recommendation on Safran from “underweight” to “line weight”. JPMorgan downgraded EDF from “overweight” to “underweight”. RBC moved from “outperform” to “inline performance” on Schneider Electric.
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