Caution gradually sets in front of the Fed – 09/15/2022 at 18:42


File photo of the offices of the London Stock Exchange Group

PARIS (Reuters) – The main European stock market, outside London, ended lower on Thursday and Wall Street gave ground in the middle of the session, the drop in oil added to the cautious approach at the Federal Reserve meeting.

In Paris, the CAC 40 lost 1.04% (64.57 points) to 6,157.84 points and in Frankfurt, the Dax dropped 0.55% while in London, the FTSE 100 gained 0.07%.

The EuroStoxx 50 index lost 0.72%, the FTSEurofirst 300 0.58% and the Stoxx 600 0.65%.

At the close of Europe, Wall Street traded in the red after a hesitant start to the session: the Dow Jones fell by 0.18%, the Standard & Poor’s 500 by 0.62% and the Nasdaq Composite by 0.94%.

After the turmoil of the last few days, mainly linked to the continuation of inflation in the United States, investors who hoped to find a new inspiration in the rain in the American indicators of the day remained dissatisfied because they did not draw any conclusions.

Jobless claims fell last week and retail sales rose an unexpected 0.3% in August. In addition, the activity index of the “Empire State” fell below expectations for September, while the “Philly Fed” posted an unexpected decline.

Finally, industrial production fell by 0.2% in August but manufacturing production increased by 0.1%.

The good health of the job market seems to be supporting consumption for now, but corporate order books are showing signs of slowing. All against a background of rising interest rates, which remain in the market ‘No. 1 concern.

Six days before the Fed’s decisions, the preferred scenario remains that of a three-quarter point increase in the “fed funds” rate, but the estimated probability of a 100 basis point increase point remains above 20% according to the FedWatch real-time barometer.

This prospect continues to encourage a downward revision of economic forecasts: Barclays now expects a contraction in advanced economies in the fourth quarter and global growth will be limited to 2.2% in 2023.

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The price of a barrel fell by almost 4%, the lowest in a week, in reaction to the announcement of an agreement between employers and unions in the railway transport sector of the United States, which may be possible avoid a strike on a large scale from Saturday and therefore major logistical disruptions.

Brent fell 3.53% to 90.78 dollars a barrel and US light crude (West Texas Intermediate, WTI) 3.74% to 85.17 dollars.

PRICES

In Europe, the biggest sectoral drop of the day was for the energy compartment, whose Stoxx index lost 2.1%. In Paris, TotalEnergies fell 2.4% and Vallourec 6.57%.

The high-tech compartment also suffered, after the Nasdaq, and posted a closing decline of 1.78%.

On the rise, the banking sector benefited from the rise of Spanish stocks after the government’s declarations of a possible change in the project for the unusual tax on bank profits. Santander gained 3.52%, Sabadell 4.9% and BBVA 2.23%.

The Stoxx index of eurozone banks took advantage of this to reach its highest level since June 10.

In M&A news, Vodafone gained 1.98% following a news that KKR funds and Global Infrastructure Partners are among the contenders for entering the round of its tower subsidiary Vantage Towers (+ 11.39%).

CHANGES

The dollar hesitated against other major currencies (+ 0.00%), not far from its recent highs.

The euro recovered 0.1% against the greenback but remained below parity, at 0.9987. Against the Swiss franc, the single currency fell to its lowest level since January 2015.

The yen fell again after its rebound on Wednesday, due to the lack of new information on possible interventions from Tokyo to support it.

The yuan fell for the first time since July 2020 the threshold of seven for one dollar in the “offshore” market.

RATE

Bond yields rose in the United States as in Europe after the American indicators of the day, due to the lack of elements that tend to question the continuation of rate increases.

The two-year American thus reached 3.879%, the highest level since 2007, before returning to 3.8604%, against 3.4548% in ten years.

In the eurozone, the ten-year German rose five basis points to 1.75% and the two-year hit an 11-year high of 1.539%.

The session was marked by a short change in the 10-30 year portion of the German yield curve, reflecting growing concern for the health of the European economy.

(Written by Marc Angrand)

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