The Stock Exchange is scrutinizing the wave of Covid-19 which is overwhelming China, the world’s second largest economy and leading importer of raw materials. And she gets scared. Since the beginning of April, the country has confined almost all of the 25 million inhabitants of its economic capital Shanghai, the epicenter of the resurgence of Covid-19. The results are hardly more reassuring in Beijing. Faced with a surge in cases, the capital called for “ act without delay “. ” The situation is grim acknowledged Tian Wei of the Beijing Municipal Party Committee. ” The risk of continuous and hidden transmission is high “, he lamented. In the streets, the inhabitants of the capital rushed to supermarkets to build up stocks, for fear of being imposed a confinement of the same magnitude as in Shanghai.
Fall of the CSI 300 index
On the stock market, it was the explosion. China’s CSI 300 index fell 4.9%, its biggest drop since February 2020, when the pandemic began. ” The fear is that the support measures already put in place by the government will be rendered ineffective by the anti-Covid policy », estimates Jenny Zeng, of Alliance Bernstein, on Bloomberg TV referring to the zero-Covid policy advocated by Beijing, which some accuse of being the cause of the country’s current difficulties and others the consequence.
Among the measures, the People’s Bank of China (BPoC) announced targeted support for homeowners and small businesses. On Monday, it indicated that it would ease its foreign exchange reserve requirements in a bid to slow the depreciation of the yuan, which fell to a 17-month low against the dollar, which also benefited from its safe haven status. From May 15, the rate of required foreign exchange reserves that Chinese banks will have to hold at the central bank will be lowered by 100 basis points, from 9% to 8%. The crisis in China raises fears of a more global derailment of the world economy. Last week, the International Monetary Fund (IMF) downgraded its global growth forecast for 2022 from 4.4% to 3.6%, citing both the war in Ukraine and the zero-Covid policy of China.
A more aggressive Fed
The prospect of a fall in Chinese demand weighed on the prices of black gold and metals. The barrel of Brent, the benchmark for the North Sea, dropped 5.2%, to 100.2 dollars a barrel, after falling to 99.7 dollars. The Texas benchmark WTI lost 5.6% to $96. This situation weighed on the securities TotalEnergies (-4.01%) and Technip Energies (-6.61%) listed on the Paris Stock Exchange. The steelmaker ArcelorMittal fell 8.84% on the back of iron ore futures contracts in China and Singapore. Weighted, the Bedroom 40 ended down 2%, at 6,449.38 points, not without hitting a low of 6,408.71 points. The business volume increased to 4.12 billion euros. The re-election of Emmanuel Macron to the French presidency has been completely relegated to the background.
Besides China, investors continue to worry about the more aggressive attitude of the US Federal Reserve (Fed) towards inflation, which could induce a slowdown in the economy. Last week, Jerome Powell, the president of the institution, played fair: a rise of half a point in the cost of money ” will be on the table of the May 3-4 meeting. The market now seems to have priced in four consecutive increases of 50 basis points in the Fed-funds, which are between 0.25% and 0.5%. In the euro zone, the idea of an increase in interest rates is also gaining ground, as several members of the board of governors have called for a rapid end to the asset purchase program ahead of monetary tightening this summer. ” Everything suggests that the ECB could raise its rates at its meeting on July 21 “, deciphers the cabinet Aurel BGC.
Rumors around Ubisoft, Valneva dives
On the front of corporate earnings releases, the week promises to be particularly busy, with around 160 announcements expected in the S&P 500, including the accounts of “tech” heavyweights, Meta Platforms (ex-Facebook), Alphabet (Google ), Apple, Amazon and Microsoft. In France, sixteen Cac 40 companies must publish their turnover or results by Friday. Vivendi (+0.35%) led the way on Monday morning. The media and entertainment group, which was also holding its general meeting, recorded growth of 13.4% in its turnover at March 31 (+7.9% at constant exchange rates and perimeter), thanks to the dynamism of its Canal+ and Havas subsidiaries.
At the head of the Cac 40, Engie rose 2.96%, driven by an opinion boost from Deutsche Bank. The broker went from “holding” to “purchase” on the title of the energy company. Also in the green, the construction and motorway concessions group vinci took 1.29%, the day after the re-election of Emmanuel Macron. Her rival Marine Le Pen had promised to renationalise motorway concessions.
Apart from the Cac 40, Valneva collapsed by 15.96%. The small Nantes laboratory, a vaccine specialist, has received a new list of questions from the European Medicines Agency (EMA) about its candidate vaccine against Covid-19. Management still hopes to obtain marketing authorization this quarter.
Conversely, Ubisoft soared 9.5%, buoyed by rumors of interest. Private equity firms Blackstone and KKR are considering a potential bid for the video game publisher, the financial news agency reports. Bloomberg.