After gaining as much as 0.93% shortly after the open, the Paris Bourse quickly pared its gains. While the trend is benefiting from the rebound on Wall Street at the very end of the session last night, attention remains focused on central bank policy, and in particular that of the Fed, whose monetary policy committee begins a two-day meeting on Tuesday. days.
At 9:45 a.m., the Bedroom 40 was almost stable at 6,066.73 points (+0.08%) in a business volume of 270 million euros.
In New York, the S&P 500 and the Nasdaq Composite went to test new two-month lows at the start of the session, before ending up 0.7% and 0.8% respectively. They had shown last week their largest weekly decline since June. Asian markets followed suit this morning, with the MSCI Asia-Pacific ex-Japan index posting its first gain in six days.
Hard landing fears
The last few sessions have been marked by a sharp shift in the perception of the monetary environment, moving from a certain optimism towards an upcoming change of course by the Fed towards a less restrictive policy to the rise of fears of a hard landing for the economy. US and world economy.
Reflecting this change in mood, the yield on the US 10-year bond reached 3.5% for the first time since 2011. More sensitive to changes in short-term inflation expectations, that of the 2-year maturity is trading at 3.94% in Asia this morning, thus approaching the 4% threshold, unheard of since 2007.
The market is generally pricing in a 75 basis point hike in the Fed funds rate tomorrow, which would put it in a range of 3% to 3.25%, up from 2.25% to 2.5% currently. They should therefore be around 4.5% in March 2023, i.e. one percentage point more than estimated in June.
The Fed has nothing to gain by surprising the markets
If not ruled out, the prospect of a 100 basis point hike is not the most likely scenario. ” The Fed has nothing to gain by surprising the markets with a stronger-than-expected hike “Summarizes Ipek Ozkardezkaya, analyst at Swissquote. Based on this assumption, it estimates that the announcement of a 75 basis point hike tomorrow would constitute ” a relief for the dollar and the equity markets, insofar as it would make it possible to unanchor the scenario of a hike of 100 basis points “. But that will also depend on the Fed’s new economic projections, as well as its estimates concerning the evolution of interest rates, the famous dot plot.
Rate hike expectations are not limited to the Fed and most central banks meeting this week are expected to opt for a tightening of monetary policy. This should notably be the case for the Bank of England, the Bank of Sweden and the Swiss National Bank.
ADP raised, Euronext downgraded
The luxury sector is the main contributor to the market rebound. LVMH gains 0.8%, Kering 1.5% and Hermes 0.8%.
The French Games (FDJ) rose by 1.6%. The gambling operator has announced that it is in exclusive negotiations with a view to acquiring ZEturf, the second largest operator in the French online horse racing betting market.
ADP increased by 2.4%. Barclays raised its recommendation on the airport operator’s stock from “underweight” to “online weight”.
Conversely, Credit Suisse downgraded Euronext from “outperformance” to “neutral”. The action of the stock exchange platform lost 3.7%.