Stocks sink, Tokyo soars to help yen – 09/22/2022 at 18:23


The Euronext logo can be seen in the financial and business district of La Defense, Paris

PARIS (Reuters) – European stock markets ended in the red on Thursday and Wall Street fell mid-session, a near-total increase in interest rates and more warnings about the risks of recession weighing on investor morale.

The foreign exchange market, for its part, was moved by the intervention of the Japanese authorities to prevent the fall of the yen, the first in 24 years.

In Paris, the CAC 40 lost 1.87% (112.83 points) to 5,918.50 points, the lowest closing level since July 14. In London, the FTSE 100 fell 1.08% and in Frankfurt, the Dax fell 1.84%.

The EuroStoxx 50 index ended at 1.85%, the FTSEurofirst 300 1.74% and the Stoxx 600 1.79%, the lowest since February 2021.

At the time of closing in Europe, Wall Street also advanced in the red, with the Dow Jones giving up 0.3%, the Standard & Poor’s 500 0.74% and the Nasdaq Composite 1.39%.

The MSCI World Index hit its lowest level since November 2020.

Technology stocks and growth in the US carried the weight of the speech on Wednesday by Federal Reserve Chairman Jerome Powell, who justified the further increase in the rate of the need to lower inflation while acknowledging that this process is not without pain. , even if he doesn’t keep saying the word “recession”.

The Bank of England (BoE), for its part, raised its key rate by half a point, as expected, while explaining that it predicted a second consecutive decline in British gross domestic product (GDP) in the third quarter, which meets the definition of a technical recession.

Before the BoE, the Swiss National Bank (SNB) and Norges Bank, the Norwegian central bank, also raised their main rate while the Bank of Japan chose to maintain the status quo to support the economy.

It is the increasingly marked difference between Japan’s monetary strategies and other major developed economies that has facilitated Tokyo’s intervention in the foreign exchange market.

CHANGES

This intervention succeeded in stopping the fall of the yen: while heading for a new low of 24 years at around 146 per dollar, it recovered around 140 before stabilizing around 142, with an increase of 1.38%.

Most traders, however, believe that this break is unsustainable.

“Over the next three to six months and beyond, as long as the different monetary strategies remain in place and the divergences continue, we will continue to see the yen weaken,” predicts Brendan McKenna, economist and currency strategist at Wells Fargo Securities.

The British pound, meanwhile, trimmed its losses against the greenback to 1.1273 after a 37-year low of 1.1213.

The euro limited its decline to 0.02%, to 0.9835 dollars, not far from the 20-year low hit at the start of the day at 0.9807.

RATE

The Fed’s announcements and the prospect of further increases in key rates favored a new surge in European bond yields: at the end of the session, the two-year German gained nearly nine basis points points to 1.836% after a more than 11+ year high of 1.897%.

The ten-year then rose to 1.963%, the highest level since September 2013.

The explanation for these movements can be seen in the American market, where the increase in yields is accelerating: the two-year takes more than 13 basis points to 4.1223% and the ten-year nearly 16 points. to 3.6661%.

The spread between the two maturities briefly reached 58 points, showing the most marked change in the yield curve since 2000, ie an increase in the estimated risk of recession in one to two years horizon.

PRICES

In Europe, among the most marked declines in the solar sector, the real estate compartment fell by 4.28% and in high technology by 4.24%.

Within the CAC 40, STMicroelectronics lost 5.96% and Unibail-Rodamco-Westfield 5.98%.

The European banking index, supported by the increase in rates, similar to improved credit margins, only fell to 0% and some major sector names ended in the green such as Société Générale (+1.60%) .

wool

Oil prices continued to benefit from renewed geopolitical tensions around Ukraine, a move that accelerated after reports that the European Union was looking for a solution to curb the price of crude oil exported to Russia .

Brent gained 0.95% to 90.68 dollars a barrel and American light crude (West Texas Intermediate, WTI) gained 1.01% to 83.78 dollars.

(Written by Marc Angrand)

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