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Tuesday, December 06, 2022

Stock exchange records eighth consecutive fall after German IPC

Stock exchange records eighth consecutive fall after German IPC

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The market begins to suspect that inflation in the euro area is peaking and Ibex-35 loses another 1.9% and risks the 7,300 mark

Clara Don

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The lifeline launched by the Bank of England on Wednesday has been a mirage with a new bond buying program to avoid financial instability in the United Kingdom. The fall made a strong comeback in the equity market and Ibex-35 registered its eighth consecutive session of decline on Thursday. The selective left another 1.9% and deepened into the 2020 low and was about to lose around 7,300 points.

The collapse in recent sessions reflects the strong panic with which investors are facing an environment of high inflation and rising interest rates. The bearish scare is felt on every trading screen and sell orders are placed to fill the trading floor with red.

The largest drops in Ibex 35 were represented by Melia (-5.45%), Naturagi (-4.38%), IAG (-4.34%), Endesa (-3.8%), Red Electrica (-3, 46%) and Telefonica was. -3.32%). On the positive side, only ‘Green’ managed to end the trading session in Sasir (+1.39%), ACS (+0.13%) and Siemens Gamesa (+0.03%).

The rest of the European stock markets also rejected the day negatively, with London down 1.77%, Paris 1.53%, Frankfurt 1.71% and Milan down 2.4%.

Investors have greeted fearfully the CPI data in Germany, which rose 10% in September, on hopes that price growth is peaking. And just a day before the average data for the euro area is known, which will undoubtedly mark the next monetary policy decision of the ECB.

Expectations of further interest rate hikes also prolong a situation that is not very common in markets, but which has become the daily bread of investors in these weeks of stress: the huge correlation between equity markets and fixed income.

At the same time investors are fleeing the stock markets, they are also selling public debt. And that price pressure drives up bond interest (which moves inversely to the price). Thus, returns on ten-year German bonds again exceeded 2.2%, while US bonds for the same period are again closer to 4%, a barrier that was crossed a few days ago.

In the forex market, one of the great generators of volatility in recent times, the euro and pound recede against the dollar. Despite the intervention of the Bank of England to halt the decline of the British currency, it repeated the decline of $1,077. For its part, the euro 0.9666 is far from parity on the greenback.

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