Global stock markets were upset by data on employment in the US

Le VIX, aussi surnommé « l'indice de la peur », a culminé à plus de 35 points dans l'après-midi.

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In financial markets, volatility returned through the front door on Friday. As Europe closed the day in the red again, Wall Street, which had sunk the day before, seemed ready to regain balance. The CAC 40 closed the session down 1.73% at 6,258 points, while the DAX in Frankfurt fell 1.64% and the EuroStoxx 50 1.82%. After a difficult week, investors were alarmed by reading data on April employment in the US, which were published early in the afternoon.

In New York, the stock market started continuing its decline that started the day before before regaining its composure at the time of the European close. Around 6 p.m., the S&P 500 fell just -0.43%, the Dow Jones -0.49% and the Nasdaq -0.60%. The VIX, also dubbed the “fear index”, peaked at more than 35 points in the afternoon – a 10-point rise in just 24 hours – before falling slightly.

Inflationary pressures

Investors were visibly nervous after the release of US employment data for the early April afternoon. These show another very tight labor market and wages close to very high levels. “This data is good news for the business, but it also shows that, at the moment, the US Federal Reserve has no reason to adopt a more compromising tone,” Christian Parisot told Aurel BGC. Because a tight labor market and high wages are likely to exacerbate inflationary pressures.

Fed Chairman Jerome Powell said Wednesday he was concerned wages were rising at an unsustainable rate. The Fed is likely to tighten monetary policy further due to supply chain disruptions from the war in Ukraine and lockdowns in China, the Minneapolis Federal Reserve chairman added. On Wednesday, the Fed had so far ruled out a 75 basis point increase and was content with an increase – already aggressive – by 50 basis points. But if the inflation spiral gets out of control, the Fed will have no choice but to raise interest rates too sharply, at the risk of stifling growth. The yield on 10-year Treasury bills increased by 4 basis points to 3.08%.

“The real questions that are rocking the markets and no one has definitive answers are how far the Fed will have to raise interest rates in 2023 to regain control of inflation and demand a recession,” Xavier said earlier in the day. . Chapard, at LBPAM.

The Fed wants to believe that it will be able to negotiate a mild landing on inflation without undermining growth. But for inflation to fall quickly, the risk is that the Fed will have to slow the economy into recession. Janet Yellen, the former Fed chairman and current US Treasury Secretary, believes a mild landing scenario is possible, but will ask the Fed to be “smart and also lucky”. “It’s not very reassuring.”

Criminal technology

The tech-savvy Nasdaq was down 4.99% on Thursday, hit hard by growing investor skepticism about US growth, which has severely punished tech stocks.

According to Bank of America, the slide in world markets that led the S&P 500 to record its worst first four months of the year since 1939 is not over. “The baseline scenario remains a scenario of falling stocks and rising yields, the culmination of which has not yet been reached,” analysts told Bloomberg.

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