Caution gradually imposed on the Fed

Caution gradually imposed on the Fed


File photo of the offices of the London Stock Exchange Group

PARIS (Reuters) – The main European stock markets, with the exception of London, closed lower on Thursday and Wall Street lost ground mid-session, adding the fall in oil to the caution before the proximity of the meeting of the Federal Reserve.

In Paris, the CAC 40 lost 1.04% (64.57 points) to 6,157.84 points and in Frankfurt, the Dax fell 0.55% while in London, the FTSE 100 gained 0.07% .

The EuroStoxx 50 index lost 0.72%, the FTSEurofirst 300 lost 0.58% and the Stoxx 600 lost 0.65%.

At the close in Europe, Wall Street was trading in the red after a shaky start in session, with the Dow Jones down 0.18%, the Standard & Poor’s 500 down 0.62% and the Nasdaq Composite down 0.94%.

After the turbulence of the last few days, linked mainly to the persistence of inflation in the United States, investors hoping to find new inspiration in the shower of US indicators for the day were left unsatisfied as they were unable to pull out any trenches.

Jobless claims fell last week and retail sales rose an unexpected 0.3% in August. In addition, the “Empire State” activity index fell less than expected for September, while the “Philly Fed” posted an unexpected drop.

Finally, industrial production fell 0.2% in August but manufacturing production increased 0.1%.

Therefore, the good health of the labor market seems to be supporting consumption at the moment, but corporate order books are showing signs of slowing down. All in a context of rising interest rates, which continues to be the main concern of the markets.

Six days before the Fed’s decisions, the preferred scenario remains that of a three-quarter point increase in the “federal funds” rate, but the estimated probability of a 100 basis point increase remains above the 20% according to FedWatch’s real-time barometer.

This outlook continues to fuel the downward revision of economic forecasts: Barclays now expects advanced economies to contract in the fourth quarter and global growth capped at 2.2% in 2023.

OIL

The price of a barrel fell almost 4%, the lowest in a week, in reaction to the announcement of an agreement between employers and unions in the rail transport sector in the United States, which should allow a large-scale strike to be avoided from Saturday. and therefore major logistical disruptions.

Brent fell 3.53% to $90.78 a barrel and US light crude (West Texas Intermediate, WTI) fell 3.74% to $85.17.

VALUES

In Europe, the largest sectoral drop of the day was in the energy compartment, whose Stoxx index lost 2.1%. In Paris, TotalEnergies fell 2.4% and Vallourec 6.57%.

The hi-tech compartment also suffered, in the wake of the Nasdaq, posting a closing drop of 1.78%.

On the rise, the banking sector benefited from the rise in the Spanish stock markets after the Government’s declarations on a possible modification of the project for exceptional taxation of bank profits. Santander gained 3.52%, Sabadell 4.9% and BBVA 2.23%.

The Stoxx index of eurozone banks took the opportunity to reach its highest level since June 10.

In M&A news, Vodafone gained 1.98% after a news report that funds KKR and Global Infrastructure Partners were among the candidates to enter the financing round for its tower subsidiary Vantage Towers (+11 .39%).

CHANGES

The dollar wavers against other major currencies (+0.00%), not far from its recent highs.

The euro recovered 0.1% against the dollar but remained below par at 0.9987. Against the Swiss franc, the single currency fell to its lowest level since January 2015.

The yen fell again after its bounce on Wednesday, due to the lack of new information on possible interventions from Tokyo to support it.

The yuan has sunk for the first time since July 2020 the threshold of seven for a dollar in the “offshore” market.

SPEED

Bond yields rose both in the United States and in Europe after the day’s American indicators, in the absence of elements that could call into question the continuation of rate hikes.

The two-year US bond thus reached 3.879%, its highest level since 2007, before returning to 3.8604%, compared to 3.4548% for the decade.

In the eurozone, the German ten-year bond rose five basis points to 1.75% and the two-year bond hit an 11-year high of 1.539%.

The session was marked by a brief inversion of the 10-30 year segment of the German yield curve, reflecting growing concerns about the health of the European economy.

(Written by Marc Angrand)

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