“ECB & Fed: Crucial Week for Stocks & Businesses

The Paris Stock Exchange is expected to decline slightly at the dawn of a decisive week on the monetary level as companies on both sides of the Atlantic. Also to follow, this Monday, the PMI activity indices for July in the euro zone and the United States.

The Paris Stock Exchange is heading for a hesitant opening. The coming week is indeed on the radars of all managers as the most important of the quarter, both in monetary and corporate terms, not to mention the preliminary PMI activity indices in Europe and the United States for the month of July, this Monday.

The US Federal Reserve will make its monetary decision on Wednesday. It will be followed the next day by that of the European Central Bank, then on Friday, by that of the Bank of Japan. Markets have fully priced in the prospect of a 25 basis point rate hike from the Fed and the ECB and will be watching for further guidance from both central banks.

Jerome Powell like Christine Lagarde should maintain a proactive discourse regarding their determination to stem inflation. The former should repeat that the Fed will remain dependent on macroeconomic indicators, with the focus on Friday’s publication of US household income and spending statistics, including the core PCE component of household spending, the inflation measure most watched by the Fed. Christine Lagarde is expected to avoid commenting on the next evolution of ECB policy, while suggesting that she intends to continue on the path of raising the cost of money.

Inflationary pressure is easing for the ECB

“If the Fed is near the end of its interest rate hike cycle, the pressure on the ECB to be more aggressive on inflation could diminish,” predicts Michael Hewson of CMC. “We have already seen the euro strengthen strongly against the dollar, which in itself is deflationary and should help reduce price pressure. In addition, producer prices in Germany and Italy have fallen sharply for several months. While underlying inflation has remained high and close to record highs, keep in mind that the ECB has already raised rates by 2% to 4% this year,” he explains.

The two central banks will monitor the preliminary S&P Global PMI indices of private sector activity in July in their respective zones on Monday. The ECB will also be watching inflation data from France, Germany and Spain this week. For the time being, the first results of the early legislative elections on Sunday across the Pyrenees give the advantage to the People’s Party of Alberto Nunez FeiJoo, who, for lack of an absolute majority, will have to deal with the far-right Vox party to hope to form a coalition government.

Nearly half of the S&P 500 companies in the running

The Bank of Japan is expected to maintain an ultra-loose monetary policy, however, markets expect a possible tightening in terms of control of the yield curve. Another important meeting: the meeting (July 28 to 31) of the Political Bureau Committee of the Chinese Communist Party. He could announce measures to support the economy. Expectations are high, particularly with regard to the bank reserve requirement rate and interest rates in general, as the decisions announced so far have disappointed.

The second-quarter earnings season will ramp up with 48% of S&P 500 companies competing this week, including tech heavyweights Alphabet, Microsoft and Meta Platforms, not to mention Intel, Boeing, Coca-Cola and Exxon Mobil. In France, 32 of the Cac 40 companies are on deck, including LVMH, L’Oréal, Hermès, Sanofi, BNP Paribas and TotalEnergies. In Europe, it will be necessary to monitor the accounts of Shell, Barclays, Banco Santander, UniCredit, Nestlé, Volkswagen, Deutsche Börse or even Unilever.

New US battery factory for Stellantis, Plastic Ominum confirms
Stellantis and South Korean battery maker Samsung SDI have plans to jointly open a second electric vehicle battery plant in the United States, which is expected to start production in 2027.

Plastic Omnium confirmed its objectives for the 2023 financial year, while its results exceeded analysts’ forecasts in the first half, in the context of an accelerated recovery in production.

Airbus has seen a drop in the range of its next jetliner, the A321XLR, after reaching an agreement with European regulators on the safety features needed to obtain certification, according to industry sources quoted by Reuters.

Accor has announced that it has entered into exclusive negotiations with the Andera Partners fund and associated investors in order to buy the shares of the company Potel & Chabot, which specializes in the organization of tailor-made receptions or associated with sporting and cultural events, which it does not yet hold, i.e. 63% of the capital.

This article is originally published on investir.lesechos.fr

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