International market declines hit the BSE

The indices of the Bucharest Stock Exchange (BVB) are facing a corrective movement in the last two to three weeks, arising in a negative climate for risky assets internationally. The BET index, which brings together the 20 most liquid stocks of our market, ended last week with a decline of 4.9% from this year's high, reached on August 1, while in the case of the energy index BET-NG , whose rebound started right from the end of July, the correction is even more severe.

In Europe, markets fell for a third week as investors grew more concerned about the outlook for monetary policy, particularly in the United States, and concerns about China's housing sector, according to CNBC.

The Stoxx 600 index was down about 0.6 percent at 6 p.m. on Friday, while the pan-European basket of shares was down nearly 5 percent from its high for the year earlier last month.

Last week, the minutes of the Federal Reserve's latest meeting showed that the US central bank is not ruling out further interest rate hikes to further tame inflation. Fed officials also expect the US economy to slow and unemployment to rise. Against this backdrop, US stocks fell and Treasury yields rose, with the ten-year yield hitting a sixteen-year high at one point, according to CNBC. China, where the economy is slowing on all fronts and Beijing has decided not to publish certain data such as youth unemployment, is reeling from the announcement that Evergrande, the world's most indebted property giant, has sought protection in the US against bankruptcy, according to the mentioned source.

• Antonio Oroian: "The financial results published by our companies were not very good, most of them registering negative developments in the second quarter of the year"

At the Bucharest Stock Exchange, indices fell on the line on Friday. The BET-XT index, which captures the dynamics of our market's 30 most liquid stocks, fell 0.8%, while the BET-BK index, the performance benchmark for equity investment funds, depreciated 0.7 %. Compared to the beginning of the month, the depreciations of the two indices are 4.4% and 4.3%, respectively.

Antonio Oroian, broker within Goldring, is of the opinion that, in addition to the international context, the decline at the BSE was also manifested in the conditions where, until now, the financial results published by many companies indicated negative dynamics in the second quarter of the year.

The broker told us: "After a very good July, a consolidation of the market was expected somewhere. However, it was not just profit-taking but declines caused, in my opinion, by a combination of factors that appeared in a fairly short period of time. I am referring here to the problems that China is showing from an economic point of view, data that also worries the rest of the world, that announcement from Italy with the overtaxation of bank profits, which initially did not have a significant impact on bank shares from us but which seems to it is felt now, if we look at the evolution of banking actions, especially at Banca Transilvania".

Recently, the Italian Government announced a 40% tax on excess bank profits, which initially created a shock wave on Italian banking stocks. At the BVB, the news did not affect the price of the credit institutions' shares at that time, but since the beginning of the month the banks in the BET have decreased by 9-10%.

The broker from Goldring added: "In addition, the financial results published by our companies so far have not been very good either, most of them registering negative developments in the second quarter of the year. Even though some were somewhat expected, such as OMV Petrom's results, which suffered heavily on the tax side, investors did not take that into account, or even the oil producer's additional dividend proposal. Moreover, the prospects for some companies did not make investors take too many risks: for example, the BUY recommendation for Romgaz (n.r. from Wood's analysis report, published at BVB Research Hub) but with an interval of much lower price than the initial one, as well as our latest analysis on OMV Petrom".

• "We see the state's "desperate" need for money, which makes the hypothesis of measures similar to those in Italy quite plausible," says Antonio Oroian

In the opinion of the Goldring broker, the state's "desperate" need for money makes the hypothesis of measures similar to those in Italy quite plausible, which can explain the current reaction of bank shares.

"All this accumulation of factors negatively influences the evolution of the stock market and I believe that this influence will continue in the coming weeks, until further notice. If we look at the same period last year, the evolution was somewhat similar, somewhere around the middle of October the returns started on most stock markets. That's precisely why I would take into account all the "gloomy" information circulating at the moment, but I would rather look for opportunities than panic and make irrational decisions", concluded Antonio Oroian.

In this context, almost all major shares on the BSE ended last week lower than at the beginning of the month. Electrica had a decline of almost 8%, while for the titles of the Bucharest Stock Exchange the depreciation was 11%. OMV Petrom had a decline of almost 6%, while for Romgaz the decline was 7%. In the case of Transgaz, the depreciation was around 10%.

• U.S. indices drop for third consecutive week

In the United States, in the first part of the stock market session, the indices were falling, going to end the third week of depreciation in a row. The largest decline was registered on the Nasdaq index of companies operating in knowledge-intensive fields, whose valuations and debt levels are more sensitive to the interest rate outlook.

"I think the markets are reassessing their optimism from July, when we had the soft landing narrative," said Michelle Cluver, portfolio strategist at Global X ETFs, according to CNBC. "Now I still see economic growth, but there are question marks about how high interest rates need to go."

Emmanuel Cau, chief strategist for European equities at Barclays, believes that absent a large-scale fiscal stimulus, sentiment towards China is unlikely to change, which is a problem for European equities. "Markets are being hit by the perfect storm amid rising rates, worsening economic data from China and poor summer liquidity. Absent a circuit breaker (aka broad-based fiscal stimulus), we think sentiment toward China is unlikely to reverse on its own, sustainably," the Barkleys strategist wrote in a note on Friday, quoted by CNBC.

The declines at the end of last week also included the crypto market, on Friday at 18:00 Bitcoin was trading at around 26,100 dollars, after the day before the cryptocurrency had reached the minimum of the last two months.