By Swann Collins, investor, writer and consultant in international affairs. Eurasia Business News, September 27, 2022
The Paris Stock Exchange closed Tuesday at its lowest point since February 2021, weighed down by the news around gas in Europe but also the trajectory of European bond yields that continue to cross highs, driven by the results of the Italian general elections, which have brought to power Georgia Meloni, heading a coalition of national-conservative parties hostile to the European Union.
After an opening up 0.70% and a large part of the session spent in the green, the French Stock Exchange CAC40 faltered at the end of the session, as the day before. The CAC 40 index lost 0.27% to 5,753.82 points.
All European and U.S. stock exchanges have had many negative sessions over the past five weeks.
There is a real triptych of inflation, recession, central banks that dominates the news on the market. Investors are wondering to what extent the European and the U.S. economies will be able to withstand all this.
The U.S. Federal Reserve, the European Central Bank and the Bank of England are determined to fight persistent inflation by raising policy rates and maintaining tight financial conditions next year, even if economic growth suffers.
As a result, bond yields in the sovereign debt market continue to rise. The French ten-year rate, the deadline that references, climbed inexorably to 2.85%, a level more reached in 10 years. In January 2022, it was still around 0.2%.
November Brent futures rose in price on the London ICE Futures exchange by $2.11 (2.51%), to $86.17 per barrel. November futures for WTI by this time rose in price at the New York Mercantile Exchange (NYMEX) by $1.78 (2.32%) – up to $78.49 per barrel.
Investors, who fear that the global economy will enter a recession, will be able to measure the impact of rising prices and rapid monetary policy tightening on corporate earnings as early as next month. October will be a crucial month for stock markets.
Many experts are advocating patience before seeing stock quotes return to sustained levels, still expecting volatile sessions as things stand.
“The situation remains tense” on the markets and the news around gas has contributed to lower European indices, reported a local source from the banking circles in Paris.
The leaks discovered today on the Nord Stream gas pipelines in the Baltic Sea “leave the markets a little doubtful“, the energy situation being an “extremely sensitive subject” at the moment. Some of observers think of a possible U.S. navy bombing of the Russian gas pipeline, to close the door of Russian gas towards Germany.
Technicolor sees all colors
Technicolor’s studios, which specialize in visual effects for cinema, video games, animation and advertising, were heckled by the markets on Tuesday after their listing on the Paris Stock Exchange, supposed to help deleverage the ex-Thomson Multimedia.
Technicolor (Euronext Paris: VANTI, OTCQX: TCLRY) announces today that it has changed its corporate name to VANTIVA, as approved by Technicolor shareholders during a General Shareholders’ Meeting on September 6th, 2022, and the completion of the distribution of 65% of Technicolor Creative Studios (“TCS”) and listing of TCS today on Euronext Paris, under the ticker symbol TCHCS.
The stocks, introduced Tuesday at nearly 2 euros per share for a valuation of more than one billion euros for the entire group, ended on a decline of 4.53% to 1.86 euros after losing more than 26% in session.
TotalEnergies largest increase in CAC 40
The French oil giant’s stock gained 1.74% to 47.85 euros.
The CEO of TotalEnergies Patrick Pouyanné announced on Tuesday that his group would invest 1 billion euros to improve the energy performance of its companies, at a time when an effort of sobriety is required of the economic world and consumers. In addition, the group’s employees in France began a strike of at least three days on Tuesday to demand in particular an increase in their wages.
Kering penalized by a rating
The French luxury giant’s stock lost 3.10% to 458.40 euros, penalized by the downgrading of a Barclays recommendation on the stock from “overweight” to “weighted”.
Read also : How to invest in gold
Gold prices were navigating between $ 1,627 and $ 1,644 per troy ounce today, losing near 6% over the past 30 days. Silver prices were negotiated between $ 18.30 and $ 18.88 per ounce today. The aggressive rate hikes policy of the U.S. Federal Reserve since June have generated a rally on the U.S. dollars.
However, the U.S. dollar retreated from two-decade highs, prompting investors to turn to gold, which had fallen to its lowest since April 2020 at $1,620.20 in the previous session. A weaker dollar makes gold attractive for holders of other currencies.
The yellow metal has always been a great hedge against inflation because it rises in price when the cost of living standards rises. Gold can store value efficiently, when paper currency loses purchasing power because of inflation.
If you have savings in a cash bank, it’s a decision. It’s the decision not to invest, and it exposes you to the damage of inflation on purchasing power.
The euro zone has been seriously threatened for several months. A new euro currency crisis is possible in the coming weeks. The gap in bond yields between Germany and Italy continues to widen, while the situation in France is no better (French public debt reached 115% of GDP, hitting 2,916.8 billion euros in Q2 2022), with a struggling economy, heavy taxes, a lower qualified workforce and degrading security.
Europeans bought their gas and oil from Russia before March 2022, in euros. Now the Russians are selling their energy to China, India and Saudi Arabia. The Saudis then resell the oil and gas to the Europeans, in dollars and at a premium price. The European Commission’s decision to ban European states from buying Russian gas and oil, has consequently led to energy shortages (lower volumes of gas and oil available for the economy), rising prices and a fall in the value of the euro, the currency n being more used for energy trading. Only the US dollar and the US oil and gas industry benefit from this situation.
Inflation is widespread on the European continent.
On 29th July the European statistics agency Eurostat reported that the inflation rate in the euro zone in July reached 8.9% per year, reaching an all-time high. Among the countries with the highest inflation rate for the year are Estonia (23.2%), Latvia (21.3%) and Lithuania (20.9%).
On 31st August Eurostat indicated that inflation in the euro zone was reaching a record 9.1% per year.
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© Copyright 2022 – Swann Collins, investor, writer and consultant in international affairs.