Europe ends in the red, Powell rekindles fears over rates

by Claude Chendjou

PARIS (Reuters) – European stock markets ended lower on Tuesday and Wall Street was also in the red late morning in New York, the chairman of the United States Federal Reserve (Fed), Jerome Powell, having declared that the central bank will likely have to raise interest rates more than expected in response to the strength of recent macroeconomic data.

In Paris, the CAC 40 ended down 0.46% at 7,339.27 points. Britain’s Footsie lost 0.13% and Germany’s Dax lost 0.6%.

The EuroStoxx 50 index fell 0.81%. The FTSEurofirst 300 fell 0.77%, as did the Stoxx 600.

In remarks prepared for a hearing before the U.S. Senate Banking Committee, Jerome Powell said the Fed is ready for even bigger moves if the “totality” of incoming information suggests more restrictive measures are needed to control the inflation.

It was his first public statement since the publication of US inflation figures which showed an unexpected reacceleration in January, while job creations during the same month came out well above expectations.

After Jerome Powell’s remarks, traders sharply raised the likelihood of a 50 basis point Fed rate hike this month to 56% from 23%, while the peak in the cost of credit was lifted from 5.47% to 5.56% by September.

“Powell is reiterating what we already know, but he’s not saying anything dovish, and the market is feeling a bit nervous about the Fed’s next move – how many rate hikes are expected and how long the Fed will keep rates high,” said Robert Pavlik, portfolio manager at Dakota Wealth.

AT WALL STREET

At the close in Europe, the Dow Jones fell 1.19%, the Standard & Poor’s 500 1.10% and the Nasdaq 0.78%.

All major sectors of the S&P-500 are in the red, with financials (-1.93%) posting the biggest decline on the prospect of a prolonged rise in interest rates which could lead to a recession.

Meta Platforms gained 0.59% in response to news that the group will again cut thousands of jobs this week.

Its competitor Snap takes 3.64%, as Senator Mark Warner said a bipartisan group of 12 US senators would introduce legislation that would give Commerce Secretary Gina Raimondo new powers to ban Chinese app TikTok.

Electric vehicle maker Rivian Automotive fell 12.17% after announcing a $1.3 billion bond issue.

VALUES IN EUROPE

In Europe, almost all the major indices also ended in the red, with a marked decline for basic resources (-2.51%), amid a contraction in Chinese imports and fears of a deterioration in the economy. given Jerome Powell’s latest statements.

In individual values, in Paris Danone (+1.1%) and Sanofi (+0.87%), at the top of the CAC 40, were one of the few satisfactions, while STMicroelectonics (-1.81%) and ArcelorMittal (-1.84%) were among the biggest declines.

Elsewhere in Europe, brewer Carlsberg fell 1.04% after the announcement of the resignation of its chief executive Cees’t Hart, while German daily consumer goods group Henkel fell 2.72% after its forecast of sales for this year.

CHANGES

In foreign exchange, the dollar jumped 1.01% against a basket of benchmark currencies, Jerome Powell having pledged to stay the course until “the job is done”, while noting that the peak in rates was likely to be higher than expected.

The euro is trading at 1.0573 dollars, down 0.98%.

RATE

In the bond market, short-term yields tightened after Jerome Powell’s statements: that of the two-year German Bund hit a high since October 2008 at 3.337% before reducing its closing gains to 3.31% .

In the United States, the yield on two-year Treasuries was up more than seven basis points, at 4.96%.

OIL

The prospect of prolonged monetary tightening in the United States weighs on oil prices on fears of weaker demand as general imports from China, the world’s largest consumer of crude oil, contracted in February by 10, 2%, according to data released on Tuesday.

Brent lost 2.74% to 83.82 dollars a barrel and US light crude (West Texas Intermediate, WTI) 3.14% to 77.93 dollars.

(Written by Claude Chendjou, edited by Kate Entringer)