In its first comeback, the Spanish stock market fell to close the session flat (-0.04%), up to 8,744 point. Solaria led the gains with a gain of 2.83%. PharmaMar (-2.42%), Grifols (2.41%), Colonial (-2.33%) and Merlin (-1.422%) were the negatives. Other large stocks like Telefonica (-1.24%), Red Electrica (0.922%), Endesa (0.744%), and Iberdrola (1.51%) are positive.
While waiting for Friday's main reference, the US employment data, investors chose to watch the bulls while they waited to learn on Friday what the main reference of this week was. This will in principle strengthen the Fed's decision that it would accelerate its withdrawal of stimuli.
The market expectations were not met by the ADP report published Thursday. In particular, companies in the country stopped hiring in May amid an ongoing effort to find workers. There was also high inflation, and only 128,000 jobs were created, compared with the 300,000.
These figures show that investors are still very conscious of the risk posed by the market's difficult balance between inflation and growth. The latest price data in the euro area, which shows a record 8.1%, could cause the European Central Bank to be more aggressive than originally planned. This is similar to what happened with the US Fed.
The fear of a slowdown of the growth rate has shaken the debt market once more. Investors are reverting to the old strategy of selling bonds and pushing down prices, thereby raising yields that move in the opposite direction.
The interest on the debt has returned to levels that were there weeks ago when they traded in the maximum zone. Although there is some relief early in the morning, the yield of the German 10-year bond is still at 1.2%. This is the highest yield since 2014, and far away from the negative sign that it showed just months ago.
Klaus Kaldemorgen is the manager of DWS. He says that "high inflation rates, previously thought to be temporary, are now a structural phenomenon." According to the firm's market forecasts, "the weakening globalization will cause a decrease in productivity and an increase of costs."
"All these events have serious macroeconomic implications. Expert warns that inflation will lead to a drop in consumer demand and that companies will suffer from lower margins and increased financing costs.
US bonds have seen their financing costs rise, particularly short-term debt. This is because it is more susceptible to changes in interest rates.
The Link Securities analysis team recalls that "the problem at this point is to determine if the Fed can skillfully enough to achieve a soft landing for the US economy, and avoid its entry into a recession." Analysts insist that the behavior of these stock market markets will depend on what investors discount.
Investors are also aware of the changes in oil prices. They went from red to green at the close European markets after OPEC announced it would increase its production to offset the rising prices and Russian export cuts. Brent is a reference oil in Europe and is currently trading at 117 USD, while West Texas is set to drop 116.8 US dollars.