PARIS (Reuters) – European markets ended in the green on Wednesday, with the exception of the CAC 40, before the next decision from the European Central Bank on Thursday, the latest inflation figures in the United States removing the prospect of a Fed rate cut.
In Paris, the CAC 40 finished stable at 8,045.38 points, while the German Dax nibbled 0.11% and the British Footsie 0.33%.
The EuroStoxx 50 index ended the session with an increase of 0.19%, compared to 0.14% for the FTSEurofirst 300 and 0.12% for the Stoxx 600.
CPI inflation in the United States was higher than consensus expected, supported by the dynamics of services and energy prices.
This unexpected rebound makes markets fear that the Federal Reserve will not lower its rates as quickly as expected, while investors were positioning themselves for a first easing in the summer.
“In a word, the report is discouraging for the Fed and removes the prospect of a rate cut in June. Inflation appears to be persistent,” note BofA strategists, who still expect an easing in June.
“But we are not very confident,” they specify.
The minutes of the Fed’s latest monetary policy meeting will be published at 6:00 p.m. GMT, and could nuance market expectations.
In Europe, investors are also preparing for the next monetary policy decision from the ECB, which should maintain its rates at their current levels on Thursday while signaling an upcoming reduction.
“The latest figures from the European credit survey should encourage the ECB to position itself for easing in June,” write MUFG strategists, as the survey showed that credit provision was eroding in the block.
A more accommodating message than expected could support European markets, which are already expecting three rate cuts in 2024.
RATE
Yields soared after the latest inflation indicator, with markets positioning themselves for a lastingly restrictive monetary policy in the United States.
At the close of the European interest rate markets, the ten-year Treasury yield rose 13.5 bp to 4.511%, compared to 17.7 bp for the two-year rate, to 4.9307%.
The German ten-year yield rose 6.1 bps to 2.434%, while the two-year yield rose 6.9 bps to 2.963%.
A WALL STREET
Wall Street is retreating, with the prospect of restrictive key rates lasting longer than expected weighing on risky assets.
At closing time in Europe, trading on the New York Stock Exchange indicated a drop of 1.31% for the Dow Jones, compared to 1.11% for the Standard & Poor’s 500, and 1.12% for the Nasdaq Composite.
VALUES
European property values lost 1.54% after the latest inflation figures, with Vonovia, Unibail, Kojamo and LEG losing around 2%.
Technology has progressed, in the wake of TSMC’s good results. Chip equipment makers ASM International and ASML Holding advanced 1.29% and 1.56%, respectively. The European new technologies index gained 0.47%.
Edenred lost 4.22% after Jefferies began covering the stock by recommending “underperform”.
Chocolate maker Barry Callebaut climbed 10.98% after reporting broadly unchanged sales volumes for its six months ended at the end of February, despite rising raw material costs.
Tesco gained 3.30%, the group having posted a profit of 2.76 billion pounds for the 2023-2024 financial year, against a forecast of 2.75 billion pounds.
CHANGES
The dollar is strengthening significantly, supported by the latest inflation figures.
The dollar gained 1.04% against a basket of reference currencies, while the euro lost 1.13% to 1.0732 dollars. The pound sterling fell by 1.13% to $1.2533.
OIL
Crude oil advances despite the latest inflation figures, during a volatile session.
Brent rose by 0.21% to $89.61 per barrel, American light crude (West Texas Intermediate, WTI) rose by 0.2% to $85.4.
TO BE CONTINUED THURSDAY:
(Written by Corentin Chappron, edited by Kate Entringer)
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