Outlook rises in Europe after Wall Street on Fed eve – 09/20/2022 at 08:49


The price of the CAC 40 index and information on company stock prices are displayed on screens suspended above the Paris Stock Exchange.

PARIS (Reuters) – The main European stock markets are expected to rise on Tuesday after a positive close on Wall Street but the rise may be limited on the eve of decisions by the United States Federal Reserve, the size of the new rising US rates left the big unknown for investors.

Index futures suggest an increase of 0.59% for the CAC 40 in Paris, 0.34% for the Dax in Frankfurt, 0.68% for the FTSE 100 in London and 0.29% for the EuroStoxx 50.

The broad European Stoxx 600 index posted its lowest closing level since July 14 on Monday after five consecutive sessions of decline and the CAC 40 broke through the 6,000 point threshold in the session for the first time since on July 15.

But American indexes extended their gains at the end of the session, a momentum that spread to major Asian markets.

The Federal Open Market Committee (FOMC) of the Fed should open in a few hours the debates that will lead to a new sharp increase in rates on Wednesday in an attempt to finally lower inflation for a long time.

Money markets still favor the assumption of a three-quarter point increase in the “fed funds” rate target but an increase of 100 basis points remains considered possible at 19% according to the time barometer real FedWatch. Beyond that, investors also expect the US central bank to give a response to the “neutral” or “pivot” level of rates, which should be reached at the beginning of next year.

The next two sessions are therefore likely to be marked by small differences, especially since the meeting of the Fed will be followed by the Bank of Japan, the Swiss National Bank and the Bank of England, among others on Thursday. .

Their decisions are all the more expected as fears of a recession have risen sharply in recent weeks, leading to growing doubts about the earnings prospects of listed companies and therefore the their valuation, now ten days from the end of the third quarter. .

“The main question in the markets today is how high rates need to go and whether there will be more earnings warnings like the one issued by FedEx last week,” he said. Michael Hewson, chief analyst at CMC Markets.

In terms of economic indicators, producer prices in Germany exceeded estimates in August and set a new record with an increase of 7.9% compared to July and 45.8% within a year.

ON WALL STREET

The New York Stock Exchange ended a seesaw session higher on Monday with reduced volumes, as uncertainty about the scale of future rate hikes complicated the task of investors.

The Dow Jones Index gained 0.64%, or 197.26 points, to 31,019.68, the Standard & Poor’s 500 gained 26.58 points, or 0.69%, to 3,899.91 and the Nasdaq Composite rose 86.62 points (+0.62%).

The technology sector, very sensitive to the economic situation, recovered slightly, such as Apple (+2.50%), Tesla (+1.88%) or Nvidia (+1.39%).

Futures currently suggest an opening of around 0.2%.

IN ASIA

In the Tokyo Stock Exchange, which remained closed on Monday, the Nikkei index ended up 0.44%, thanks among other things to the rebound in technology stocks.

In China, the Shanghai SSE Composite gained 0.16% and the CSI 300 0.06%. The People’s Bank of China (PBC) left its main key rates unchanged in its monthly fix, a status quo that came as no surprise against a backdrop of continued yuan weakness.

PURCHASE/CHILD

The dollar lost some ground against other major currencies (-0.04%) but moved only 1% below the 20-plus-year high recorded on September 7.

The euro took advantage of the opportunity to rise above parity, at 1.0027 dollars, but the yen, at 143.36 to the dollar, has already given up its gains at the start of the session.

RATE

In the bond market, the US two-year yield stood at 3.9601% after rising at the start of the day on Monday to 3.97%, the highest level since November 2007.

The ten-year fell slightly, to 3.4887%, the day after a peak of 3.518%, the highest since April 2011.

In Europe, the ten-year German gained two basis points in the first exchange to 1.81%.

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The oil market traded in narrow spreads after its rise on Monday, as investors await the Fed’s decisions to try to assess their impact on global demand for crude oil in the coming months.

Brent rose 0.21% to 92.19 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.03% to 85.76 dollars.

(Writing by Marc Angrand, editing by Matthieu Protard and Kate Entringer)

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