HESITANCY IN SIGHT IN EUROPE AFTER THE ECB AND POWELL
by Claude Chendjou
PARIS (Reuters) – Europe’s main stock markets are expected to open on a dovish note on Friday after the European Central Bank (ECB) hiked rates the day before and the U.S. Federal Reserve chairman vowed to fight back. inflation.
According to the first available indications, the Parisian CAC 40 should fall 0.01% at the open and the Frankfurt Dax 0.06%. London’s FTSE 100, however, could gain 0.28%. The EuroStoxx 50 Index is expected to fall 0.03%.
The ECB decided on Thursday to raise the cost of credit by an unprecedented 75 basis points, while hinting that it would continue its monetary tightening, thus prioritizing the fight against inflation despite the risk of recession in the euro zone this winter.
In the United States, where a rate hike of the same magnitude is expected on September 21, Federal Reserve Chairman Jerome Powell said Thursday that the Fed will continue to act “strongly” to counter inflation.
In the markets, the probability of a three quarter point Fed rate hike is now 86% versus 77% yesterday.
The prospect of an acceleration in the cost of credit in both the United States and Europe did not spook equity markets on Thursday, even if some volatility remains.
“There’s a lot of uncertainty and I think investors won’t make up their minds until they see the light at the end of the tunnel,” said Grace Lee, portfolio manager at Columbia Threadneedle Investments.
Analysts say the ECB and Powell announcements are not really a surprise and are already priced in, leading investors now to turn to monthly US consumer price figures and the final inflation stat for August. in the euro zone, two new economic data to be released next week.
The ECB also reaffirmed that the future path of its key rates will continue to depend on economic data.
Friday’s session could also be fueled by the gas crisis, as a council of EU energy ministers meets in Brussels as EU countries seek emergency solutions to soaring energy bills.
ON WALL STREET
The New York Stock Exchange closed higher on Thursday, thanks to support from banks and health stocks.
The Dow Jones Industrial Average gained 0.61%, or 193.24 points, to 31,774.52 points.
The broader S&P-500 gained 26.31 points, or 0.66%, to 4,006.18 points.
The Nasdaq Composite advanced 70.23 points (0.60%) to 11,862.13 points.
On the Tokyo Stock Exchange, the Nikkei index ended up 0.53% at 28,214.75 points and the broader Topix was up 0.4% at 1,965.53 points.
In China, the Shanghai SSE Composite gained 0.75% and the CSI 300 1.34%.
In terms of economic indicators, consumer prices in China increased in August at a slower pace than expected (+2.5% annual, after +2.7% in July) due to the heat wave and the regrowth of the COVID-19 epidemic, according to official data published on Friday.
US bond yields are broadly flat on Friday after rising sharply the day before, with the two-year listed at 3.5045% and the ten-year trading at 3.3078%.
In Europe, the ten-year German, which took 14 basis points on Thursday, gained another 5.1 points to 1.767%, while the two-year advanced 9.5 points to 1.416% after gaining more than twenty points on standby.
France’s ten-year OAT rate rose 6.3 points to 2.32% after rising ten points on Thursday.
At the exchange rate, the dollar lost almost 0.6% against a basket of benchmark currencies, but remained near its 24-year high against the yen. The Japanese currency suffers from the policy of the Bank of Japan considered accommodative while that of the Fed is considered restrictive.
The euro, which hit a nearly 20-year low at the start of the week, rose 0.69% to $1.0063, well above parity with the dollar, benefiting from the ECB’s announcements.
The oil market remains volatile, with investors torn between threats from Russia to stop its deliveries of hydrocarbons and fears of a drop in demand.
Brent rose 0.34% to $89.45 a barrel and US light crude (West Texas Intermediate, WTI) rose 0.19% to $83.70.
Both oil benchmarks, however, should show a decline for the week as a whole.
(Written by Claude Chendjou, edited by Bertrand Boucey)
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