Expected fall in Europe after the Fed

Expected fall in Europe after the Fed

The sign near the Palais Brongniart, the former Paris Stock Exchange, located on the Place de la Bourse in Paris

The sign near the Palais Brongniart, the former Paris Stock Exchange, located on the Place de la Bourse in Paris

by Claude Chendjou

PARIS (Reuters) – Major European stocks are expected to fall on Thursday in the wake of Wall Street, when the session should once again be dominated by central bank decisions the day after a three-quarter percentage point rise in interest rates. Reserve (Fed).

According to the first available indications, the Frankfurt Dax should lose 1.82% at the open, the London FTSE 100 0.92% and the EuroStoxx 50 index 1.75%.

The US Federal Reserve on Wednesday announced a third consecutive interest rate hike of three-quarters of a percentage point and hinted that it should decide on a fourth before the end of the year to reduce inflation.

The fed funds rate target is therefore raised to 3.00%-3.25%, its highest level since 2008, and new central bank projections show it should rise by a further 1.25 percentage points. by the end of December, then peak at 4.60% in 2023.

These new projections, considered aggressive, surprised investors, especially the most optimistic ones who had initially been relieved by a rate hike limited to three quarters of a point while a 100 basis point hike was also on the table.

“The Fed isn’t going to stop anytime soon and there will be a prolonged period of tight monetary policy until at least next year,” said Sally Auld, chief investment officer at wealth manager JB Were. .

The FOMC (Federal Open Market Committee), the central bank’s monetary policy committee, however indicated on Wednesday that it does not foresee any rate cut before 2024.

In Japan, the country’s Central Bank maintained its ultralax policy on Thursday, keeping the short-term interest rate target at -0.1%, thus widening the gap between its strategy and those pursued by the other major central banks in the world.

Investors are now awaiting monetary policy releases from the Swiss National Bank (SNB), the Bank of England (BoE) and Norges Bank (the Norwegian central bank), while in the euro zone Friday’s release of manufacturing PMIs and services must provide them with new elements on the evolution of the economic situation.

ON WALL STREET

The New York Stock Exchange closed this Wednesday with sharp falls, after a session of nervousness in which investors tried to decipher the latest announcements from the Federal Reserve and the speech of its president, Jerome Powell.

The Dow Jones Industrial Average fell 1.7%, or 522.45 points, to 30,183.78 points.

The broader S&P-500 lost 66.11 points, or 1.71%, to 3,789.82 points.

The Nasdaq Composite fell 204.86 points (-1.79%) to 11,220.19 points.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index, which hit a two-month low in the session, fell 0.57% to 27,156.21 points. The broader Topix fell 0.2% to 1,916.94 points as the close approached.

In China, the Shanghai SSE Composite lost 0.29% and the CSI 300 lost 0.79%.

SPEED

In the bond market, the yield spread between 10-year and two-year US Treasuries widened to 56 points as investors braced for a recession. The profitability of the former stands at 3.5416% and that of the latter at 4.1320% in the Asian markets.

In Europe, the ten-year German yield ended at 1.88% while the two-year returned to 1.75%.

CHANGES

The dollar, up 0.88% against a basket of benchmark currencies, continues to benefit from both its safe haven status and rising US interest rates.

The yen fell to more than 20 years at 145.5 dollars before the announcement of the decisions of the Bank of Japan.

The euro, with a fall of 0.06%, is trading at 0.9831 dollars.

OIL

Oil is supported by renewed geopolitical tensions and supply fears taking precedence over demand concerns.

Brent rose 0.41% to $90.2 a barrel and US light crude (West Texas Intermediate, WTI) rose 0.37% to $83.25 a barrel.

(Written by Claude Chendjou, edited by Matthieu Protard)

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