Investors are restless. They see smoke on the horizon and do not know if it is a small fire or the prelude to a great fire. The recovery after the pandemic had to be brilliant to leave behind the dark times of the Great Seclusion. But the war in Ukraine, the energy crisis and bottlenecks in the industry have upset the pulse of the world economy, lighting up the nightmare of inflation. Runaway prices have disrupted plans. The voices of those who predict a new crisis are increasing. Investors flee in terror in the face of growing instability. In the stock markets, sell orders are intensifying and the large indices are contracting.
The Spanish selective has started this Friday with new losses, of 0.62%, infected by the closure of Wall Street, but has quickly turned around to add just over 1% in the middle of the session. The rest of the great European squares travel the same path, adding timid climbs after dawn in red. The German DAX, the French CAC or the Italian FTSE MIB seem to be waiting for the path that Wall Street takes this Friday to react.
“Extreme pessimism is now deeply ingrained,” Anna Macdonald, fund manager at Amati Global Investors, told Bloomberg. “There is a good chance that we are at the beginning of a volatile bottom process, although we have not yet passed the peak of uncertainty,” explains Yves Bonzon of the Swiss private bank Julius Baer.
On the other side of the pond, futures predict another day of red numbers after the worst first semester in decades. Wall Street is reacting these weeks with more nervousness. On Thursday the session closed in the red to certify the worst first half since 1970. The outlook is not encouraging, analysts no longer rule out an economic recession caused by the decisive action of central banks to contain inflation. A Deutsche Bank survey of 475 analysts and investors shows that 90% expect a recession in the United States before 2023.
Rapid increases in interest rates are a brake on activity. That uncertainty is transferred to the markets. European stocks also experienced their worst semester since the spread of covid. It has been six months of extreme volatility due to the Russian invasion of Ukraine and the change in direction of monetary policy. The Ibex lost 8.5% in June, the worst month since the start of the pandemic.
“A sense of apprehension grips financial markets, and anxiety is mounting that by targeting inflation, central banks risk severely weakening economies,” Susannah Streeter, an analyst at Hargreaves Lansdown, told Bloomberg.
Inflation does not give a truce. The European statistical office, Eurostat, published this Friday the inflation data that continues its climb to 8.6% in June. “This sends an important message about what the European Central Bank should be doing,” said Florien Ielpo, head of research at Lombard Odier Investment Managers, according to the report. Financial Times. “They are likely to get harder and harder.” If the ECB becomes more aggressive in raising rates, the possibility of the economy stalling will grow. And that scares away investors.
On the other hand, the price of a barrel of oil brenta reference for the Old Continent, was trading at 108.5 dollars, down 0.49%, while the Texas stood at 105.05 dollars, down 0.67%.
In the foreign exchange market, the euro lost positions against the dollar and was exchanged at 1.0461 ‘greenbacks’, while, in the debt market, the Spanish risk premium was around 111 basic points, with the interest required at ten-year bond at 2.438%.