Wall Street (on a rising trend of 0.2 percent after three hours of trading) and Europe (on an average decrease of 1 percent) have a blatantly different reading of the considerable downward revision of the U.S. gross domestic product of the first quarter of 2014 (-2.9 percent contrary to the first estimate of 0.1 percent).
From the vantage point of Wall Street, “the worse it is,” the better it is for share trading; from Paris’ point of view, bad numbers remain bad numbers.
CAC 40* (-1.28 percent at 4,460 points with 3.3 billion traded) finds itself at the bottom of the European league table (with Madrid at -1.25 percent) while London and Milan only lost 0.8 percent, Brussels -1 percent and Frankfort -0.71 percent.
The downward trend period worsened at 2:45 p.m.; the European positions fell by an average of -1.3 percent then. They reduced their losses by 30 percent, thanks to the positive direction of the U.S. indexes (from 0.15 percent to 0.2 percent on the S&P and NASDAQ) which seems surrealistic after the spectacular downward revision of the U.S. GDP from -1 percent to -2.9 percent (while -1.8 percent was anticipated).
This fall is the most important observed in the last five years in the U.S. (first quarter of 2009), according to the final estimate published this Wednesday by the Department of Commerce.
A reversal of the momentum of unprecedented magnitude from one quarter to the next after a rise of 2.6 percent in the last 2013 semester: a growth spread of -5.5 percent is the result of a negative evolution of the stocks, exportation (-8.9 percent), investments and health care expenditures (Obamacare has not increased drug expenses).
The resilience of Wall Street is ascribed to the dual convictiothat the “temporary air pocket” of the first quarter has already been filled (3.5 percent growth is anticipated in the second quarter) … while these results can only prompt the Fed to postpone its decision to raise interest rates.
In regard to the end of “QE3,” it should take place by the end of 2014, but some people imagine a scenario where the tapering could take a break if the economic recovery is not as vigorous as Wall Street hoped by the second quarter (in which case, the benefits will not follow … yet the markets will still be swarmed by abundant liquidity).
Forex traders seem to share the same point of view; they short sell an undervalued dollar (under the 1.3640/E which is -0.25 percent): everything has to be started from scratch for the European Central Bank!
On the values side, Soitec plummeted by -7.5 percent after having announced its intention to ask the market to finance its capital increase (83.1 million euros) through the issue of new shares at 1.6 euro each. Among the CAC 40, Essilor closed the day with -2.75 percent and GDF Suez fell by 2.3 percent while the government announced this morning that it has finalized a disposal of securities amounting to 3.1 percent of the energy group capital. The operation is aimed at financing a potential Alstom’s capital increase, which decreased by 0.7 percent.
GDF Suez is being investigated by the American Commodity Futures Trading Commission for its alleged practices in the electricity market in Texas, according to Aurel BGC which quotes Energy Risk magazine. To be noted, Carrefour increased by 2 percent contrary to the U.S. distribution market; only M6 performed better with 2.9 percent.
Moody’s Investors Service announced it changed Alstom rate, associated to long term credit, from “negative” to “positive,” now established at “Baa3.” The rating agency explained its decision when the French group announced its decision to give up its energy sectors to the American giant, GE.
*Editor’s note: The CAC 40 is a French stock market index.
Leave a Reply
You must be logged in to post a comment.