Equities down in the face of likely inflation

  •   19/02/2021 - 11h03
  •   DEHOUI Lionel

After opening higher at the beginning of the week, the European stock markets saw their statistics change negatively. On Wednesday, the session ended with a sharp drop in equities. A drop caused by doubts of possible inflation which would have many consequences. The surge in this inflation will reach not only the European market, but especially the United States before discouraging investors.

Equities down in the face of likely inflation
Image copyright: Shinya Suzuki - Flickr

Inflation that could shake up the stock market

Midway through Wednesday's trading, stocks on the European stock market were showing rather negative statistics. The climate was marked by fears of inflation that could occur in the coming days. An uncertain situation whose effectiveness will have great consequences, not only on investments, but also on trade.

Moreover, if such a problem were to arise, it could impact central banks' decision-making. The latter will be obliged to review their monetary and economic policies planned for global economic recovery. As a result, hopes for a revival of the economic sector are fading. This explains the fall in equities, which will be followed by a decline in investment in the various sectors.

At present, inflation is still uncertain. But when it does, the US stock markets will be the first to be affected.


The Fed reassures

This Wednesday, the market was doing rather well in Europe. There was a breakthrough thanks to rising benchmark government bond yields and a 0.7% increase in British consumer prices.

As for America, Wednesday's session was marked by the minutes of the Federal Reserve's latest meeting on monetary policy. This report showed that policy makers are not as worried about inflation.


About Values

The publication of the quarterly results was a key factor in the news of the European stock market. Among the latter, those of Kering were rather negative, leading to a 7.15% drop. M6, on the other hand, posted a 12.69% increase after publishing favourable results.

The Zalando share fell by 6.48%, followed by the distributor Ahold Delhaize by 3.31%. The Eramet mining group increased by 14.29% following the announcement of a rebound in its EBITDA in 2021. Consumer leader Belersdorf also fell 5.89% due to unfavourable annual forecasts. The Stoxx retail index fell by 3.08% while the energy sector was up by a significant 0.33%.


On the interest rate and exchange rate front

On the rate side, there is the 10-year treasury yield, which increases by 12.737%. As for the German Bund, we are seeing a decrease of 0.37%, whereas the last decrease last June was 0.331%.

Speaking of exchange rates, the euro is down and in the basket of reference currencies, the dollar is up 0.48%. This is a ten-day peak favoured by bond yields on the U.S. stock market.