EUROPEAN STOCK MARKS END UP
by Laetitia Volga
PARIS (Reuters) – European stocks closed in the green on Wednesday as Wall Street rose as weaker-than-expected U.S. inflation data eased fears of a big Federal Reserve rate hike. during its next meeting in September.
In Paris, the CAC 40 gained 0.52% to 6,523.44 points. Britain’s Footsie gained 0.25% and Germany’s Dax advanced 1.23%.
The EuroStoxx 50 index finished 0.91%, the FTSEurofirst 300 0.68% and the Stoxx 600 0.89%.
At the time of the close in Europe, Wall Street was in a strong bullish trend: the Dow Jones gained 1.54%, the Standard & Poor’s 500 1.94% and the Nasdaq Composite 2.58%.
Consumer prices (CPI) in the United States stagnated in July and showed an increase of 8.5% year-on-year while the Reuters consensus expected a rise of 0.2% monthly and 8.7% annual.
Federal funds rate futures now reflect the probability that the US central bank will raise the target federal funds rate by 50 basis points in September (between 2.75% and 3%), no more than 75 points basis as estimated before the release of the inflation figures. .
Still, the Fed’s fight against runaway inflation is far from over, and Fed officials may hesitate to slow the pace and scope of monetary tightening, some strategists say.
“Overall, prices are still too high,” wrote Rubeela Farooq of High Frequency Economics. “Together with job and wage growth, the inflation data supports the case for another significant rate hike in September.”
Charles Evans, president of the Chicago Fed, emphasized that inflation remains at an “unacceptable” level and that the Fed will have to continue its monetary tightening to bring the “federal funds” rate probably into the 3.25% range. 3.5% to go. of the year.
In the stock market, defensive sectors were among the biggest decliners, with healthcare down 0.88% and utilities down 0.51%.
In corporate news, retailer Ahold Delhaize rose 7.57% in Amsterdam after raising its annual earnings per share forecast again.
US inflation data translated into lower bond yields as expectations of a sharp Fed rate hike in September faded.
The ten-year US Treasury bond yield hit a low of 2.674% before hovering back around 2.76%, down three basis points.
The European market followed suit, with Germany’s 10-year yield falling as low as 0.837%, its lowest level since August 5, before paring its losses.
According to Refinitiv data, money markets still have a 100% chance of a 50 basis point hike in key rates from the European Central Bank in September, but investors now estimate the rate hike to be 106 basis points for december. compared to 113 bp before the publication of inflation in the United States.
“There is enough difference in inflationary pressures between the US and the euro zone that the ECB’s short-term expectations don’t change much,” said Peter McCallum, a strategist at Mizuho.
The dollar fell 1.34% against a basket of benchmark currencies (+0.02%) on US inflation data, allowing the euro to hit five-week highs against the greenback at 1.0331.
The British pound fell in the session to its lowest level since July 26 against the euro after a report by the Bloomberg agency that the British government plans to plan power cuts for industry and homes in January in the event of a winter. very cold and gas shortage. .
Oil prices are stabilizing after falling due to the resumption of crude deliveries on the Druzhba pipeline linking Russia with several Central European countries and the US Energy Information Agency’s announcement of a Larger-than-expected rise in US crude stocks last week.
Brent is unchanged at $96.3 a barrel and US light crude (West Texas Intermediate, WTI) is trading at $90.67.
(Written by Laetitia Volga, edited by Matthieu Protard)
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