Equity markets aim to recover from inflationary tensions

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The Ibex-35 tries to recover the 8,800 points pending oil and unemployment data in Spain and the US

European stocks are entering a somewhat quieter session, at least until the US ADP employment report comes out, a prelude to the official figures released Friday that predictably will mark the Fed’s decision to withdraw stimulus measures. accelerate will strengthen .

At this point, and in anticipation of Wall Street’s opening, the Ibex-35 rose 0.3% to 8,778 points, in line with the rest of European stock markets.

Despite the recovery in the session, it is clear that investors remain highly aware of market risks. Especially after the latest inflation data in the eurozone, with a new record high of 8.1%, the European Central Bank (ECB) could be much more aggressive than initially expected.

It seems clear that there is no doubt that major monetary institutions are already working to curb inflation, although rate hikes pose an obstacle to economic recovery.

This scenario of fears of a slowdown is once again shaking up debt markets, with investors repeating the strategy of selling bonds, pushing prices down and thereby boosting yields that move in the opposite direction.

Debt yields in particular are recovering to the levels of weeks ago when they were still trading in the maximum zone. While the escalation may take a while at the start of the day, the yield on the 10-year German bond is still estimated at 1.2%, the highest level since 2014 and far from the negative sign it left just a few months ago. to see.

Financing costs have also risen for US bonds, especially short-term debt, which are more sensitive to potential interest rate hikes.

They also recall from Link Securities’ analytics department that on Wednesday the Fed has already begun the process of recovering its disproportionate balance, which is currently more than $9 trillion (the so-called quantitative tening), which will be in a first phase ​​from not reinvesting the bonds that the agency has in its portfolio that come to maturity. “This process, along with increases in official interest rates, will undoubtedly lead to a tightening of financial conditions for businesses and individuals, ultimately taking its toll on US economic growth.”

“The difficulty right now is knowing whether the Fed will be smart enough to provide a soft landing for the US economy and prevent it from sliding into recession. The behavior of these stock markets in the coming months will largely depend on what investors discount,” analysts point out.

Investors also remain very aware of the evolution of oil prices, which fell by almost 2% after Saudi Arabia announced it could study to increase its production if Russia stops exporting crude oil. The barrel of Brent, a benchmark in Europe, is trading at $114, while the US West Texas is about to drop $113.

Source: La Verdad

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