Powell continues to weigh on stocks and boost the dollar – 08/29/2022 at 07:37


POWELL CONTINUES TO LEAD EQUITIES AND DOLLAR RISES

PARIS (Reuters) – The main European stock markets are expected to fall sharply on Monday, as market sentiment remains weighed down by the latest statements from Federal Reserve Chairman Jerome Powell, marking a a long period of high interest rates to counter inflation.

The future contracts of the indices suggest a decrease of 1.41% for the Dax in Frankfurt and 1.25% for the EuroStoxx 50. As for the CAC 40 in Paris, it may give around 1.1% according to the first direction available.

Markets will remain closed in the UK for the “Summer Bank Holiday”.

By declaring Friday in Jackson Hole that the Fed should continue for “some time” a tight policy even if it means slowing growth, Jerome Powell got off on the wrong foot with some of the investors, hoping that the first signs of progress ahead. of inflation will slow down the rise of interest rates.

“Powell made it clear that there was no shift to an accommodative stance as some expected,” said Carol Kong, senior partner for currency and economic strategy at the Commonwealth Bank of Australia.

Markets are now pricing in a 72.5% chance of a three-quarter point hike in the fed funds rate target after the Fed’s next meeting in late September, according to Time Barometer.real FedWatch .

And the rhetoric was not particularly encouraging from the side of the European Central Bank (ECB), whose several leaders argued this week in favor of a sharp increase in rates next month to prevent a prolonged anchoring of inflation. .

The week that started will be made up of, among other things, the employment numbers listed in the United States and the first inflation estimates for August in the euro zone.

VALUES FOLLOWING:

ON WALL STREET

The New York Stock Exchange experienced one of the worst sessions in recent months on Friday after Jerome Powell’s speech, and its decline seems to continue.

The Dow Jones index fell 3.03%, or 1,008.38 points, to 32,283.4, the Standard & Poor’s 500 lost 141.38 points, or 3.37%, to 4,057.74 and the Nasdaq Composite fell to 497.56 in the session since 497.56. session (1.594%). June 16.

All 11 major S&P sectors ended in the red, with high tech down 4.28% and telecommunications services down 3.87%. Among the heaviest drops of the day, Nvidia fell 9.2% and Amazon fell 4.8%.

During the week, the three major indexes in New York fell between 4 and 4.5%.

And futures contracts suggest an opening of sharp decline, around 0.7% for the Dow and more than 1.2% for the Nasdaq.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index lost 2.66% less than an hour from the close and hit its lowest session level since August 10, a decline that affected technology stocks after the Nasdaq. as well as industrial ones, although the falling yen limited the damage for major exporters.

In China, the Shanghai SSE Composite lost 0.24% and the CSI 300 0.68%.

CHANGES

The dollar, which rose 0.61% against other major currencies, was at a 20-year high, driven again by expectations of widening rate differentials.

The euro lost 0.44% against the greenback at 0.9917.

The yuan, he broke the threshold of 6.9 to the dollar despite the announcement by the People’s Bank of China (PBC) of an increase in the daily central rate.

RATE

The yield of two-year US Treasury bills, which is particularly sensitive to interest rate expectations, continued to rise in Asian exchanges and reached the highest level since the end of 2007 at 3.489%, which is more than nine points basis.

The ten year, he takes more than eight points to 3.1155% but remains below its peak in mid-June (3.499%).

The two- to ten-year portion of the yield curve thus remains clearly inverted with a spread of more than 36 basis points between the two exchanges.

On the European side, Euribor futures fell, marking an upward revision to the possibility of a three-quarter point increase in ECB rates in September.

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The oil market was supported by reports that OPEC + may cut production if necessary to support prices, a hope added to the renewed violence in recent days in Libya and demand expectations in Europe due to the increase in gas prices.

Brent gained 0.88% to 101.88 dollars a barrel and American light crude (West Texas Intermediate, WTI) 1.07% to 94.06 dollars. They gained 4.4% and 2.5% respectively last week.

THERE ARE NO MAJOR ECONOMIC INDICATORS ON THE DAILY AGENDA

(Written by Marc Angrand)

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