(BFM Bourse) – Falling in session to a two-month low under 6400 points, the CAC 40 partially reduced its losses to close down “only” 1.74% on Monday. Concern over the possible repercussions of a bankruptcy by promoter China Evergrande is leading investors to reassess the level of valuation of equities, as growth in several major economies appears to be slowing.
The clouds that have been hanging over the financial markets for several weeks on Monday caused a cold shower for the indices, even if the results for the CAC 40 are finally relatively moderate. While the -3% mark has been reached several times this year in session – especially on July 19, the biggest drop of the year, and again on August 19, the flagship index was not lower than -2.75% this time (shortly before the opening of Wall Street), and finally closed down 1.74% “only” to 6,455.81 points.
Trade volumes, in excess of 5 billion euros, show all the same that the alert was serious, faced with the risk now considered very real of bankruptcy of the troubled promoter China Evergrande Group. 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.
The New York Stock Exchange seemed, for once, to be heading for a steeper decline than in Europe, with -2% decline for the Dow and -3% for the Nasdaq Composite, at mid-session across the Atlantic.
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
Unsurprisingly, the fundamental news of Parisian stocks has taken a back seat in the face of such a cocktail of concerns, the 19% increase in OSE Immuno representing a rare reason for satisfaction. The main treatment of the Nantes biotech, the therapeutic vaccine Tedopi against cancer, had the honors of a “late breaking session” at the main European congress of oncology. JCDecaux took 4.2% while a stock market advice site went back to buying this morning, and Mauna Kea gained 12.6% 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 euros gross to the company.
Atos, which now operates outside the CAC 40 sample, gleaned 1.2% after BFM Business reported the potential interest of players such as Sopra Steria for the group. On the CAC 40, less than a fifth of the sample was able to hold its own, Safran nevertheless recording a rebound of 2.2% at the end of the day after a signal of resumption of air traffic between the United States and the United States. ‘Europe. Airbus did not take advantage, slowed by 0.9% by the prospect, mentioned by Reuters, of a rescheduling of deliveries or a discount to preserve a giant contract won with the Malaysian company AirAsia. Air France-KLM for its part took off 5.3%.
Among the many declines, cyclical stocks were the most affected, starting with ArcelorMittal which fell 8% with the fall in steel prices, followed by Société Générale (-5.7%), Stellantis (-5 , 2%), BNP Paribas (-4.5%) and Crédit Agricole (-3.9%). Even with the announcement of a € 300 million contract to supply 25 commuter trains to the Melbourne, Australia urban transport network, Alstom fell 3%.
OVHCloud launches its process to go public
It should also be noted that after several months of suspense, OVHcloud has kicked off its IPO project on the Paris Stock Exchange.
On the foreign exchange market, the euro was trying to stabilize at 1.1730 dollars (+ 0.03%), after a low at 1.17 dollars marking a low of a month earlier in the morning.
With commodities, oil prices were also struggling, with nearly 1.6% decline for a barrel of Brent to 74.18 dollars.
Guillaume Bayre – © 2021 BFM Bourse