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Inflation remains very high but the markets ignore it

(AOF) – The European equity indices ended a session that was once again particularly volatile. The CAC 40 jumped 2.5% to 6,269.73 points, while the Euro Stoxx 50 rose 3.23% to 3,640.65 points. On Wall Street, the trend is mixed: around 5:30 p.m., the Dow Jones gained 0.7% while the Nasdaq lost 0.5%.

The places of the Old Continent evolved on a positive note in expectation of the figures of American inflation in April. Investors were hoping for a sufficiently marked slowdown in the rise in prices to finally say to themselves: “the peak has passed”.

The ace. Admittedly, inflation has decelerated, but less than expected. On an annual basis, it was 8.3% in April, against 8.5% in March. The consensus gave it at 8.1%. Same disappointment for so-called core inflation, which shows a gain of 6.2% over one year. This is less than in March (6.5%) but more than the consensus (6%).

On the markets, the reaction was as brutal as it was immediate. The indices swung into the red… Before rebounding even more.

An improvement that is difficult to justify at first glance. Perhaps investors believe that markets have fallen so much in recent weeks that even a modest decline in inflation is good news? Or simply that he could not spoil the buy-back phase on the cheap initiated yesterday?

Samy Chaar, chief economist at Lombard Odier believes that for the market environment to improve, inflation must reach a decisive peak and there must be convincing signs that inflation is returning to low levels. more acceptable.

According to him, some early signs of a peak seem to be emerging, such as more moderate wage growth and the end of the acceleration in price increases. “But we don’t yet see signs of moderating pressures that could pull prices down further. Aside from pandemic-related items, such as used cars and airline tickets, basis, including rents, continue to rise,” comments the economist who believes the Fed will remain aggressive.

The management company continues to expect a 50 basis point rise in the key rate in June, but others are discounting 75 basis points.

On the interest rate markets, the yield of the US 10 lost 2 basis points to 2.98%, below the 3% threshold.

On the Paris Stock Exchange, growth stocks took advantage of this relaxation. L’Oréal jumped 4.8%. In contrast, Alstom lost 5.16%, penalized by lackluster annual results.

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