European stocks in red as Fed waits – 09/20/2022 at 12:50 pm


The emblem of the London Stock Exchange

by Claude Chendjou

PARIS (Reuters) – Wall Street is expected to fall at the opening on Tuesday and European stocks are also in the red in the middle of the session, at the start of the first day of the monetary policy meeting of the United States Federal Reserve which should take the lead. to a sharp increase in interest rates on Wednesday at the risk of an acceleration in the deterioration of the economic situation.

The future of the indices in New York announced an opening on Wall Street below 0.40% for the Dow Jones, 0.47% for the Standard & Poor’s 500 and 0.57% for the Nasdaq.

In Paris, the CAC 40 fell 0.95% to 6,003.92 at 10:15 GMT. In Frankfurt, the Dax gained 0.83% and in London, closed on Monday due to the funeral of Queen Elizabeth II, the FTSE fell 0.19%.

The pan-European FTSEurofirst 300 index fell by 0.55%, the EuroStoxx 50 in the euro zone by 0.74% and the Stoxx 600 by 0.73%.

Faced with the continuation of high inflation, which reached 8.3% a year in August in the United States, the decisions on Wednesday of the Federal Open Market Committee (FOMC) of the Fed, which met on Tuesday, are highly anticipated by those investor.

Markets were primarily counting on a rise in rates of 75 basis points, but a rise of 100 points was excluded.

Sweden’s central bank surprised on Tuesday by announcing a 100-point increase in its main interest rate to 1.75% and warned that it plans to continue tightening monetary policy to combat the inflation.

Monetary policy decisions by the Bank of England (BoE), Bank of Japan (BoJ) and Swiss National Bank (SNB) will be announced on Thursday. Switzerland also significantly reduced its growth forecasts on Tuesday, to 2% for this year and 1.1% for 2023.

In the euro zone, where the European Central Bank (ECB) raised its rates by 75 points at the beginning of the month, its president, Christine Lagarde, should speak at night in a debate in Germany.

“It’s all about central banks this week,” said Erik-Jan van Harn, macroeconomic strategist at RaboResearch.

Meanwhile, official statistics published on Tuesday showed that producer prices in Germany recorded an unprecedented increase in August in a year and a month, by 45.8% and 7.9% respectively. one.

VALUES IN EUROPE

The banking sector (+0.55%), supported by expectations of rising interest rates, posted the strongest rise in the Stoxx 600, while, on the other hand, real estate (-3.84%), which should suffered from the increase in the cost of credit, showing the sharpest drop.

Unibail-Rodamco and Klépierre lost 1.74% and 1.38% respectively, while Commerzbank advanced 1.84%.

Luxury stocks such as Kering (+0.57%) or Richemont (+0.69%) were also in demand, taking advantage of the project to ease health restrictions in China.

In terms of business results, the British DIY store group Kingfisher (-3.31%) was punished by a fall of almost 30% in half-year profits, while the German Henkel, which rose by 0.83%, benefited from to increase organic growth. forecast for this year.

RATE

European bond yields continued to rise, especially on German producer price numbers.

That of the ten-year German Bund reached a three-month high of 1.89%, the five-year peak since July 2011 of 1.8% and the two-year, the most sensitive to changes in rates, a peak since July 2011 at 1.69%.

Expectations of the evolution of credit costs show the interbank rate in the euro zone at 2.7% in August 2023.

In the United States, the yield on ten-year Treasuries rose by nearly five points to 3.54% and the two-year by about three points to 3.97%.

CHANGES

The dollar (+0.13%) remains close to its 20-year high against other major currencies, which was recorded on September 7.

The euro, down 0.16% to $1.0006, is just holding above parity with the greenback.

The Swedish krona briefly benefited in the morning from a sudden rate hike by the country’s central bank to trade at 10.7025 to the euro and 10.764 to the dollar before losing all of its gains.

wool

Oil prices were supported by supply tensions, an OPEC+ document showed that the organization’s production was below the planned target of 3.583 million barrels per day (bpd) in August.

Investors are also waiting for the Fed’s decisions to try to assess their consequences on global demand for crude oil in the coming months.

Brent nibbles 0.01% to 91.99 dollars a barrel and American light crude (West Texas Intermediate, WTI) gains 0.27% to 85.50 dollars.

(Writing by Claude Chendjou, editing by Kate Entringer)

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