by Claude Chendjou
PARIS (Reuters) – European stocks ended sharply in the green on Wednesday and Wall Street was also trending higher at mid-session, with equity markets buoyed by signs of progress in talks between Ukraine and Russia. Russia, pending monetary policy announcements from the US Federal Reserve (Fed).
In Paris, the CAC 40 ended with a gain of 3.68% to 6,588.64 points. The British Footsie took 1.75% and the German Dax 3.76%.
The EuroStoxx 50 index advanced by 4.13%, the FTSEurofirst 300 by 2.92% and the Stoxx 600 by 3.07%.
Even if fighting continues in Ukraine, Russia on Wednesday signaled the possibility of quickly reaching compromises on certain points of the negotiations between the two countries, and the Ukrainian President, Volodimir Zelensky, judged that the talks between Moscow and Kyiv seemed to take a more realistic turn.
Sign of a lull in the equity markets, the volatility index in the United States fell 7% to 27.8 points, while its European equivalent ended at a low of more than two weeks at around 36. dots (-12.5%).
In terms of macroeconomics, the US Federal Reserve is due to announce its monetary policy decisions at 6:00 p.m. GMT after a two-day meeting. Half an hour later its president, Jerome Powell, will give a press conference.
While consumer prices in the United States for the month of February emerged last week up 6.4% on an annual basis, the highest level since August 1982, the markets are anticipating a rate hike of at least 25 basis points which would mark the first stage of a new cycle of raising the cost of credit.
Robert Pavlik, investment strategist at SlateStone Wealth, said the Fed’s expected rate hike could come with more cautious talk about the pace of key rate hikes, while Gregory Perdon, co-chief investment officer at Arbuthnot Latham, for his part, said he expects the war in Ukraine to dampen the pace of Fed tightening this year.
The positive trend is also supported by statements by the Chinese authorities on favorable policy measures for its capital markets.
VALUES IN EUROPE
On the pan-European Stoxx 600, apart from utilities (-0.7%) and energy (-0.3%), all major sectors finished in the green. The consumption of non-essential goods and services (+5.1%), that of high technologies (+5.2%), that of finance (+4.3%) and that of automobiles (5. 3%) recorded the strongest gains.
Renault jumped 7.7% and automotive supplier Faurecia 8.4%. BMW advanced 4.1% despite lowering its profit margin forecast for this year amid war in Ukraine. The German group, however, achieved in 2021 its best profit margin since 2017.
In banks (+5.05%), Societe Generale and Unicredit, particularly exposed to Russia, rose by 9.1% and 6.4% respectively, while in luxury (+4.2%), depending from China, Hermès and LVMH gained 7.5% and 6.5% respectively.
Elsewhere in Europe, Avast fell 13.2% after concerns raised by the UK competition authority over its planned takeover by NortonLifeLock, while the outlook for Zara’s parent Inditex was weak. welcomed by investors.
AT WALL STREET
At the time of the close in Europe, the Dow Jones was up 1.2%, the Standard & Poor’s 500 1.6% and the Nasdaq 2.5%, with almost all of the major sectors of the rating in the green , with finance (+2.6%) in the lead.
JP Morgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America and Wells Fargo gained 3% to 6.4%, while technology stocks, which have fallen sharply since the start of the year, also rose despite the monetary tightening expectations. Tesla and Apple gained 3.9% and 1.7% respectively and the sector index of “techs” advanced by 2.1%.
THE INDICATORS OF THE DAY
Figures released Wednesday by the Commerce Department show that retail sales in the United States rose less than expected in February with a rise of 0.3% after a 4.9% gain in January.
CHANGES
The dollar, which hit an almost two-year high last week against a basket of major international currencies in response to Fed rate hike expectations, is down 0.49% as it nears the end of the US central bank meeting.
The euro, supported by optimism on the Ukrainian issue, took the opportunity to rise to 1.1009 dollars (+0.51%).
The pound sterling, which fell to 1.3000 dollars on Tuesday, a 16-month low, also rose to 1.3106 (+0.53%) on the eve of the Bank of England’s monetary policy statement. A quarter-point increase in the central bank’s key rate is expected by the money markets.
RATE
As Fed decisions approach, bond yields rise. That of ten-year US Treasury bills advanced 1.5 basis points to 2.175%, while the five-year yield hit a peak since May 2019 at 2.149%.
In Europe, risk appetite helped bond yields rise: that of the ten-year German Bund ended up 6.8 points at 0.3970% after hitting its highest level since November 2018 at 0 .4%. Its French equivalent of the same maturity appreciated by 4.5 points to 0.8550%.
OIL
After two consecutive days of declines, the oil market is volatile, with investors torn between easing fears over Chinese demand and hoping for a diplomatic solution to the Ukraine crisis.
The International Energy Agency (IEA) has further indicated that three million barrels per day of Russian oil may not be on the market from April as a result of the Russian-Ukrainian conflict.
Brent fell 0.87% to 99.03 dollars a barrel, but US crude (West Texas Intermediate, WTI) nibbled 0.15% to 96.71 dollars a barrel.
(Report Claude Chendjou, edited Jean-Michel Bélot XX)