Equity markets continued to rebound, despite recession fears. Low-cost airlines have borne the brunt of announced strikes.
The return of risk appetite carried the equity markets on Tuesday. Investors again began buying cheaply after the indices hit a 17-month low last week in the context of accelerating monetary tightening by central banks in the face of galloping inflation. The reopening of Wall Street higher after a holiday also drove the trend. However, in Europe, the gains remained limited, as fears of stagflation, a mixture of economic slowdown and high inflation, have not disappeared.
“I think it’s a pause in a downtrend with this increasing likelihood of slowing growth, high inflation, potentially stagflation.”
Analysts believe that the current rebound in equity markets is not a long-term one. “I think it’s a pause in a downtrend with this increasing likelihood of slowing growth, high inflation, potentially stagflation,” said Timothy Graf, macroeconomic strategist at State Street.
The Stoxx 600 gained 0.35%. The Dax gained 0.2%, the CAC 40 0.75% and the FTSE 100 0.42%. The Bel 20 also saw a modest rise of 0.37%, helped by the rebound inmoney (+3.84%), from KBC (+1.72%), but not by its other heavyweight, AB InBev (-1.43%).
The positive trend in equity markets is driven by cyclical sectors such as the automobileraw materials, chemicals and construction, while energy benefited from a new surge in oil prices.
The compartment ofs transport and leisure on the other hand fell by 0.65%, weighed down by the decline in low cost. Wizz Air dropped 4.08% and EasyJet 6.31%, sanctioned because of the proliferation of strike calls in several airlines where employees, under pressure from the sudden resumption of traffic, are demanding an improvement in their working conditions. Whereas Ryanair (-4.03%) will experience several strike days at the end of the week, its competitor easyJet may be faced with the same situation in July. A Spanish union is calling for a nine-day strike at various Spanish hubs of British society.
“Rising interest rates were only partially passed on to consumers, so the ability of these stocks to create value was significantly reduced, as was their valuation.”
The segment of community services also experienced a decline of 1.07%, notably weighed down by the Italian electricity companies. Citi analysts have lowered their price target for all Italian stocks in the sector. “Rising interest rates were only partially passed on to consumers, so the ability of these stocks to create value was significantly reduced, as was their valuation,” said Citi analyst Antonella Bianchessi. . “The macroeconomic backdrop also adds material pressure to rate regulation, resulting in higher regulatory risk.” The society Terna (-2.59%) even saw its recommendation lowered to “sell” by the bank.
On the other hand, on the Milan Stock Exchange, the defense group Leonardo jumped 3.51% after the announcement of the takeover by its American subsidiary DRS of the Israeli RADA Electronic Industries, which will allow DRS to be listed on the Nasdaq. The company had given up in March 2021 to IPO DRS, bought in 2008, citing uncertainties about the evolution of military spending in the United States and investor concerns about the impact of the expected rise in interest rates. .
In London, the British distributor ocado tumbled 2.51% after a capital increase of 575 million pounds sterling (670 million euros).