US Markets Nervous Ahead of April Consumer Prices Release and Debt Ceiling Negotiations

Tuesday’s session starts on a cautious note. In the early morning, the Cac 40 fell 0.32% to 7,415.52 points, the day after a slight gain of 0.11%.

No trend, it must be said, coming from Wall Street, where the major indices were content to oscillate around their closing levels. The Dow Jones slid 0.17% when the Nasdaq Composite climbed 0.18%. A lot of caution when approaching consumer prices for the month of April, which will be presented this Wednesday. It is hoped that core US inflation will fall from 5.6% in March to 5.5% over one year, while the overall figure could have stabilized around 5%. But in monthly data, the latter could have increased by 0.1% to 0.4% due to the rise in energy prices after the production cuts undertaken by the OPEC+ countries. ” Any upside inflation surprise would put Fed hawks back in the spotlight and lead to lower dovish expectations “, indicated Monday Ipek Ozkardeskaya, of Swissquote.

Tighter credit conditions

While the latest jobs numbers released on Friday came in strong, Mike Wilson, chief U.S. equity strategist at Morgan Stanley, said the market is too optimistic about the chances that Fed rate cuts could be accompanied by further increases. sustainable growth. ” The Stock Exchange continues to bet on the best of both worlds, he writes in a note, we consider that the probability that these two elements occur together this year is low, and our economists do not expect moreover rate cuts in 2023. Investors now have an overly optimistic view of Fed policy ».

As a result, too, according to the latest opinion survey (“Sloos”) of Federal Reserve officials, the number of banks that have tightened their credit conditions came out higher than expected, at 46%, against 44 .8% expected. “ Tighter standards, weaker demand for commercial and industrial loans, less favorable macroeconomic conditions, reduced risk tolerance, deterioration in the value of collateral and concerns about funding costs and banks’ liquidity positions were included. among the key words and expressions that emerged from this survey “, Details this morning Ipek Ozkardeskaya.

An “economic disaster”

Another cause for concern is the US debt ceiling. Avoid at all costs a possible defect. Treasury Secretary Janet Yellen sounded the alarm again, saying a non-raise would be a ” economic disaster “. Time is running out because, according to Janet Yellen’s calculations, the government would run out of money to pay its bills by June 1, almost two months earlier than Goldman Sachs economists had expected. To avoid a national debt default, Congress must vote to raise or suspend the $31.4 trillion limit before the Treasury runs out of emergency funding. Joe Biden invited in turn, to the White House, the Republican President of the House of Representatives, Kevin McCarthy (this Tuesday), the Democratic leader of the House, Hakeem Jeffries, that of the majority in the Senate, Chuck Schumer, and Republican leader Mitch McConnell.

Little information from the business side. CMA CGM will acquire the logistics activities of Bollore for 4.65 billion euros before calculation of debt and cash on the date of completion of the transaction. The two parties entered into negotiations on April 18.