2023-09-21 13:41:34
Shanghai was falling. London, Tokyo and Paris were making progress. Oil prices were rising. (Photo: The Canadian Press)
MARKET REVIEWS. European stock markets fell on Thursday, gauging the monetary policy announcements of the Bank of England, which left its rates unchanged like the American central bank the day before, the latter having however warned of a future increase in rates by the end of the year.
Stock market indices at 8:10 a.m.
Global markets were in decline Thursday morning, a day after a tough session on Wall Street when the U.S. Federal Reserve warned its rate cuts could be more modest than expected next year.
The DAX German lost 0.7% at the start of the session in Europe, the CAC 40 French 1% and FTSE 100 British 0.4%.
In New York, before the markets opened, the average Dow Jones industrial values slipped 0.2% and the broader index S&P 500 of 0.3%.
In Asia, the Nikkei 225 plunged 1.4% in Tokyo. The scholarship of Shanghai fell by 0.8% and the Hang Seng fell 1.3% in Hong Kong. Sydney fell by 1.4% and Seoul of 1.6%.
On the New York Commodity Exchange, the price of oil dropped 92 US cents to US$88.73 per barrel.
The context
The Bank of England announced that it would leave its rates unchanged, at 5.25%, marking a first pause since the start of its rate hike cycle initiated in December 2021.
The institution, however, remained vague on the future of its future monetary policy, only indicating that further tightening would be possible depending on inflation.
In reaction, the pound fell by 0.67% to 1.2261 American dollars ($US).
Elsewhere in Europe, the central banks of Sweden and Norway raised their rates by 0.25 percentage points on Thursday. The Swiss central bank, for its part, created a surprise by pausing, maintaining its key rate at 1.75%, however leaving the door open to a future turn of the screw.
The monetary policy announcements of the American Federal Reserve (Fed), which spoke on Wednesday evening after the close of the European markets, continue to animate the stock markets.
If the Fed has maintained its rates at their current level, it has also not closed the door to an additional increase by the end of 2023 and then expects a slower rate cut than expected so far, because the Growth in the United States this year should be twice as strong as what the institution anticipated in June.
“Investors still have no visibility on the Fed’s next decisions, which will be taken meeting after meeting,” comment the economists at Aurel BGC.
Wall Street was heading towards a lower opening, the futures contracts of the three main indices dropped between 0.54% and 1.06% after closing sharply lower the day before.
In the bond market, the yield on 10-year US government bonds reached its highest since November 2007, and the two-year maturity took off to its highest in 17 years.
The 10-year US Treasury yields were at 4.44% compared to 4.41% at the previous day’s close, the 2-year yield was at 5.16% compared to 5.18% the day before.
“It will now be difficult for international stock markets to compete with rising yields in US bond markets. The attractiveness of bonds is increasing while the risk/reward ratio of stocks continues to deteriorate,” observes Andreas Lipkow, independent analyst.
In Asia, red dominated on the stock markets, Hong Kong fell by 1.29%, Shanghai by 0.77% and Tokyo by 1.37%.
The yen had reached its lowest level in more than ten months against the dollar on Wednesday, shaken by the offensive posture of the Fed and the surge in American bond rates and the greenback fell by 0.27% to 147.93 yen for a dollar.
The Bank of Japan (BoJ) will make its monetary policy decision on Friday and “it should keep its interest rates very low,” anticipates Stephen Innes, analyst at SPI AM.
JD Sports Fashion takes off in London
Shares in sportswear retailer JD Sports Fashion jumped in London after posting a sharp rise in first-half net profit, with clothing chain Next following suit despite the cost of living crisis in the United Kingdom.
JD Sports Fashion soared 6.88% and Next took 2%.
Oil declines
Oil prices lost ground on Thursday, weighed down by investors’ aversion to risk due to the Fed’s offensive tone.
The barrel of North Sea Brent, for delivery in November, lost 0.72% to US$92.86. Its American equivalent, the barrel of West Texas Intermediate (WTI)for delivery in the same month, which is the first day of use as a reference contract, fell by 0.66% to US$89.07.
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