(BFM Bourse) – Fearing the consequences of the hard line adopted by the Chinese authorities vis-à-vis the excesses of the real estate market, the CAC 40 falls to a two-month low on Monday morning, at the dawn of a week with strong macroeconomic stakes with the Fed meeting.
The sum of all the fears that have been hovering for several weeks around the financial markets reached a degree of concentration on Monday that heavily destabilized the CAC 40, causing around 12:15 a drop of 2.2% of the tricolor index to 6,425.95 points , in an already very high volume of 1.5 billion euros.
The most obvious panic factor stems from the difficulties of China Evergrande Group. The risk, hypothetical a few weeks ago, of an outright bankruptcy of the second largest Chinese real estate developer now appears imminent. The attitude of the Chinese authorities suggests that Beijing is ready to let the company go down, inflicting on its shareholders and especially on the holders of its debt (with a nominal value equivalent to $ 300 billion, a world record for a real estate company). gigantic losses.
A fall of Evergrande, present on more than 1,300 real estate projects in 280 Chinese cities, would constitute the most difficult test in years for the financial system of the country, with repercussions still difficult to envisage beyond. However, many operators remember a business precedent that the authorities let go bankrupt for example: that of Lehman Brothers thirteen years and a few days ago. Which does not encourage serenity.
Stabilize the prices of raw materials
The schedule means that the Shanghai Stock Exchange was closed on Monday and will remain so for most of the week, but Hong Kong, which remained open, had a difficult session, with a drop in companies linked directly or indirectly to real estate. . Several maturities (interest payments) on Evergrande’s debt are slated for this week, with the company having some sort of 30-day grace period before a formal default is pronounced – so this story is likely to fall apart. endure, notes Jeffrey Halley, senior analyst at Oanda, specializing in Asia-Pacific.
On the other hand, Chinese Premier Li said this weekend that China would use “market tools” to stabilize commodity prices, significantly accentuating the correction in metals in particular (copper, aluminum, palladium, not to mention iron ore which has already lost 20% last week).
Delicate debate on the debt ceiling in the United States
On the side of the United States, the question of raising the ceiling of the federal debt, until now almost automatically approved, appears more and more delicate in front of an extremely polarized Parliament – not to mention the dissensions which begin to appear within even from the Democratic camp on the amount of budgetary efforts. In the event of a deadlock on the debt ceiling, the government should have to close dozens of agencies across the country and suspend the payment of salaries to hundreds of thousands of civil servants considered non-essential (including all those from the Environmental Protection…). This could affect the administrative functions of Social Security administration, Medicare program, mortgage approvals, etc. At the end of 2018 at the start of 2019, the United States had already experienced the longest shutdown of history (one month and three days), which did not fail to weigh on the activity.
These fears come even more at a time when the markets are questioning the level of valuations in the face of a probable slowdown in global growth, with most global indices showing declines since the beginning of September, after a year so far. very promising (including seven monthly gains in a row for the CAC).
“Tapering” or not?
Under these circumstances, the meeting of the Federal Reserve’s monetary policy committee is due to be held on Tuesday and Wednesday. The attitude of the US central bank will be scrutinized more closely than ever. Given Jerome Powell’s latest speech, and statements from other FOMC members, it is unlikely that the Fed will report “sufficient progress” or announce the start of the tapering this week, judge Christian Scherrmann, economist at DWS.
“Despite certainly sufficient progress on inflation, the recent moderate recovery in employment, more moderate inflationary pressures and the uncertainty associated with the Delta variant are all factors that may reduce the pressure on policy adjustment. We think that the authorities might want to wait and see if the recovery in employment expected at the end of unemployment benefits in September really materializes. ” However, this data will not be available until the next meeting of the Monetary Policy Committee, in November. “Therefore, we maintain our position that the tapering will be announced at the November Committee meeting and that the reduction in asset purchases will begin no earlier than December 2021, “he said.
Be that as it may, between the slowdown in the Chinese economy, already perceptible in recent statistics, not to mention the Evergrande risk, and the rise in uncertainties over the United States’ budgetary situation, the main monetary decision-makers are going have to be particularly careful.
OSE Immuno in the spotlight in cancer
The news of Parisian stocks is unsurprisingly taking a back seat in the face of such a cocktail of concerns, and the 25% increase in OSE Immuno represents a rare ray of sunshine. The main treatment of the Nantes biotech, the therapeutic vaccine Tedopi against cancer, has the honors of a “late breaking session” at the main European congress of oncology. JCDecaux takes 5% while a stock market advice site went back to purchase this morning, and Mauna Kea gained 3.6% thanks to the conclusion of a research agreement with the Lung Cancer Initiative, supported by the giant Johnson & Johnson, which will participate in a reserved capital increase bringing € 12.5 million gross to the company.
Atos, which now operates outside the CAC 40 sample, scoops up a few cents after BFM Business reported the potential interest of players such as Sopra Steria for the group. The 40 stocks currently making up the flagship index are in the red, including the new entrant Eurofins (-1.3%). Cyclical stocks are the most affected, starting with ArcelorMittal which fell 6.45% with the fall in steel prices, followed by Société Générale (-5.6%), Stellantis (-4.8%) Credit Agricultural (-3.9%) or URW (-3.7%).
OVHCloud launches its process to go public
Having had, according to Reuters, to agree to a rescheduling of deliveries or a discount on a giant contract with the Malaysian company AirAsia, Airbus lost 3.4%. Alstom is backing down by the same amount, despite the signing of a new € 300 million contract for the supply of 25 commuter trains to the urban transport network in Melbourne, Australia.
It should also be noted that after several months of suspense, OVHcloud is launching its IPO process on the Paris Stock Exchange.
In the foreign exchange market, the euro fell 0.13% to $ 1.1712, after a low to $ 1.17 marking a low of a month earlier in the morning.
With commodities, oil prices are also struggling, with nearly 2% decline for a barrel of Brent to 73.87 dollars.
Guillaume Bayre – © 2021 BFM Bourse