The weakness of the macro returns pessimism to the Stock Markets

2023-07-05 18:06:16

Fears of the economic slowdown return, and forcefully, to the global financial markets. The publication of some weaker-than-expected macroeconomic data has again alerted investors to the impact that the rise in interest rates has on activity.

The central banks have already made it clear that there is still room to undertake a couple more increases in the reference rates between now and the end of the year, even if that implies a greater blow to growth. After all, that is precisely one of the objectives of the most aggressive monetary policy: to cool the economy to discourage demand and, thus, relax inflation that is still far from the 2% target.

Against this backdrop, and after exceeding 9,600 points on Monday, the Ibex-35 is collecting benefits with a fall of 1% to 9,486 points at the close of a session marked by the final data of the composite PMI for the euro zone for the month June, which has been much worse than expected. Finally, it stood at 49.9 points, from the 50.3 anticipated by analysts and with a sharp deterioration compared to the 52.8 points in May.

The contraction has also been felt in other regions such as China, where the service sector PMI also slowed much more than expected. So investors have chosen to undo positions in values ​​more linked to the cycle, such as banks or steel companies, with falls of more than 2% for Acerinox or ArcelorMittal.

However, Solaria was the most bearish value with losses of more than 5% at closing. Only four stocks, in fact, held up positively (Indra, Bankinter, Inditex and Grifols).

debt stress

Fears of the slowdown are also reflected in the debt markets, where investors have once again rushed to sell government debt, pushing prices down and raising yields (which move inversely).

In Europe, the interest required by investors to buy ten-year German debt -the region’s main reference- is around 2.5%, while in the US the reference exceeds 3.9%, a maximum of three months.

Analysts indicate that, as things are, the market now presents two very opposing positions. On the one hand, that of those investors who believe that the economy will tend to a “soft landing” in the coming months, with inflation moderating enough for central banks to stop raising interest rates. On the other hand, those who believe that the rise in prices will continue and the restrictive monetary policies will end up leading the main economies into a deep recession.

“For now, as the stock markets have behaved in the first half, it seems that the first of these visions has prevailed,” indicate the analysts at Link Securities. However, from now on it will be the macroeconomic data and the new round of corporate results that will start in mid-July the factors that determine who was right.