Drop expected in Europe after the Fed – 09/22/2022 at 08:03


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

by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to fall on Thursday after Wall Street when the session should again be dominated by the decisions of the central banks of the day after a three quarter point increase in interest rates. Reserve (Fed).

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

The US Federal Reserve on Wednesday announced a third consecutive three-quarter percent interest rate hike and announced that it should decide on a fourth by the end of the year to lower inflation. .

The fed funds rate target was thus raised to 3.00%-3.25%, the highest level since 2008, and the central bank’s new projections show that it should increase by 1.25 percentage points. at the end of December, then the peak of 4.60% in 2023.

These new projections, considered aggressive, shocked investors, especially the most optimistic who were initially relieved by a rate increase limited to three quarters of a point while a 100 basis point Point increases are also on the table.

“The Fed is not going to stop anytime soon and will have a long 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 cuts before 2024.

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

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

ON WALL STREET

The New York Stock Exchange ended lower on Wednesday, after a nervous session in which investors tried to interpret the latest announcements from the Federal Reserve and the speech of its chairman, Jerome Powell.

The Dow Jones index 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 by 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 session low, 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%.

RATE

In the bond market, the yield spread between ten-year and two-year US Treasuries widened 56 points as investors braced for a recession. The yield of the first is shown at 3.5416% and the second at 4.1320% in Asian markets.

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

CHANGES

The dollar, which rose 0.88% against a basket of benchmark currencies, continued to benefit from its status as a safe haven and from rising US interest rates.

The yen fell to a more than 20-year low of 145.5 dollars before the announcement of the Bank of Japan’s decisions.

The euro, down 0.06%, traded at 0.9831 dollars.

wool

Oil was supported by renewed geopolitical tensions and supply fears that outweighed demand concerns.

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

(Written by Claude Chendjou, edited by Matthieu Protard)

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