SLIGHT RISE IN VIEW FOR EUROPEAN EQUITIES, POWELL REASSURED
by Laetitia Volga
PARIS (Archyde.com) – The main European stock markets are expected to rise slightly at the opening on Thursday in the wake of Wall Street following statements by Jerome Powell, the chairman of the Federal Reserve, which allayed some fears among investors about the pace of future rate hikes.
The first indications available indicate an increase of 0.42% for the Parisian CAC 40, 0.36% for the Dax in Frankfurt, 0.23% for the FTSE in London and 0.5% for the EuroStoxx 50 .
Unsurprisingly, the Fed raised the federal funds rate target by three-quarters points on Wednesday after its two-day meeting to stem rising prices.
Jerome Powell’s comments that followed gave some investors hope that the pace of rate hikes would slow.
While he said another unusually strong hike might be appropriate at the September meeting, Jerome Powell added that this decision will depend on the next economic data and that some indicators showed signs of slowing, suggesting that the rate hike that took place so far is beginning to bear fruit without leading to a recession in the United States.
“There are signs that we are closer to the end than the beginning of this tightening cycle. With the fed funds rate now at neutral, the Fed Chairman mentioned that at some point it will be appropriate to slow down,'” said Michael Feroli, chief economist at JPMorgan. “We are therefore confident of a 50 basis point rate hike in September even if Powell left the door open at +0.75%.
The focus is now on the US gross domestic product figure for the second quarter which could be decisive for the Fed’s next decisions.
The Archyde.com consensus expects growth of 0.5% after the 1.6% contraction in the January-March period, but the Atlanta Federal Reserve’s GDPNow forecast model calls for a decline of 1.2%.
The market will also take note of the first estimate of German inflation in July.
VALUES TO FOLLOW:
The results will animate the rating at the start of the session in Europe, investors reacting in particular to those of Safran, Orange, STMicroelectronics, Nestlé and Volkswagen.
A WALL STREET
The New York Stock Exchange ended sharply higher on Wednesday after the Fed’s announcements: the Dow Jones index gained 1.37% to 32,197.59 points, the broader S&P-500 took 2.62% to 4,023.61 points and the Nasdaq Composite climbed 4.06% to 12,032.42 points.
The Nasdaq posted its strongest rise since April 2020, while the S&P-500 hit a record close since June 8.
The main Wall Street indices were in the green even before the Fed’s statement, driven by solid results from Microsoft (+6.7%) and Alphabet (+7.7%) which fueled investor confidence.
After the close, Meta shares fell 4.6% as Facebook’s parent company issued a gloomy forecast after reporting a quarterly revenue decline for the first time amid threats. a global recession and increased competitive pressure on its sales.
The Nasdaq is therefore indicated down 0.47% according to index futures, while the S&P-500 is down 0.26% and the Dow Jones down 0.15%.
IN ASIA
The Nikkei on the Tokyo Stock Exchange rose 0.23%, erasing part of the day’s gains as investors worried about the quarterly results of Japanese companies.
“The index rose too much in early trading and that was just a reaction to Wall Street’s strong performance,” said Shigetoshi Kamada, at Tachibana Securities. “Investors quickly realized that they could not be optimistic about the outlook for Japanese companies. Some results are good but on closer inspection, the weak yen tends to be the only positive factor.”
In China, the large-cap CSI 300 gained 0.56% but the Hang Seng lost 0.2% after the Hong Kong Monetary Authority raised its benchmark rate by 75 basis points.
EXCHANGES/RATES
The dollar index fell slightly (-0.14%) after having already dropped 0.7% the day before after remarks deemed less restrictive than expected by the Federal Reserve.
The euro is stable at 1.0202 dollars.
On the US bond market, the yield on ten-year Treasuries took more than six basis points to 2.7958%, erasing the losses recorded on Wednesday.
OIL
Oil extends yesterday’s gains, buoyed by renewed investor interest in risky assets and the Energy Information Administration’s (EIA) weekly U.S. inventory figures showing a steeper-than-expected decline crude inventories and a rebound in gasoline demand.
Brent gained 0.7% to 107.37 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.01% to 98.24 dollars.
(Written by Laetitia Volga, edited by Nicolas Delame)