by Laetitia Volga
PARIS (Reuters) – European stock markets, with the exception of London, ended lower on Thursday as bond yields soar on the prospect of a further rise in US interest rates.
In Paris, the CAC 40 lost 0.54% to 6,243.28 points and the German Dax dropped 0.95%.
The EuroStoxx 50 index fell by 0.8%, the FTSEurofirst 300 by 0.89% and the Stoxx 600 by 0.93%.
At the time of the close in Europe, Wall Street was moving in the red: the Dow Jones yielded 0.09%, the Standard & Poor’s 500 0.28% and the Nasdaq Composite 0.62%.
In an intervention considered more restrictive than expected, Jerome Powell said on Wednesday that the peak in interest rates would probably be higher than what Fed members had estimated in September, deeming a pause in monetary tightening “very premature “while opening the door to a slowdown in the pace.
“We’ve had a cumulative 400 basis point rally in eight months, one of the strongest rallies in history. Not to sit and watch for a few months how the data reacts is simply reckless,” he said. Thomas Hayes, chairman of Great Hill Capital.
“I think the kind of double talk we saw yesterday (Wednesday, editor’s note) is really starting to massively erode the credibility of everything they say,” he added.
In London, the Footsie index (+0.62%) escaped the gloom in reaction to the fall of the pound sterling after the more accommodating tone of the Bank of England. The institution unsurprisingly raised its key rate by three quarters of a point, but above all it announced that it should not reach the peak anticipated by the markets, due to the risk of recession.
CHANGES
On the currency market, the pound fell 1.8% against the greenback, to its lowest level in two weeks, after the BoE’s warning on the British economy, exposed to a long recession.
“We are heading towards a divergence of central bank policies,” said Michael Quinn, senior trader at Monex Europe. “Fundamentals in the US are certainly stronger and healthier than in Europe… The picture is pretty bleak for the pound at the moment.”
Among the indicators of the day, the PMI index on the activity of the British private sector suffered in October its strongest contraction since January 2021.
The index which measures fluctuations in the dollar against a benchmark basket climbed 1.49% and the euro fell to 0.9757 dollars.
RATE
On the bond markets, the yield on ten-year US Treasury bonds amplifies the progression that began on Wednesday after statements by Jerome Powell.
It takes more than nine basis points to 4.1553% while the two-year, more sensitive to rate expectations, has peaked since 2007 at 4.745%.
The trend followed in Europe where the ten-year German Bund yield took over 11 basis points to 2.248%.
VALUES
On the stock market, the technology compartment (-2.34%) suffered from the rise in sovereign bond yields and the announcement by the American Qualcomm (-6.31%) of a disappointing sales forecast for the last quarter. 2023.
Biggest drop in the CAC 40, Legrand lost 5.44% after quarterly results deemed unconvincing. Conversely, BNP Paribas (+3.14%) published quarterly results above expectations, boosted by its market activities.
The insurer Axa took 3.11% after publishing an increase in its turnover for the first nine months.
In Frankfurt, BMW fell 4.66% as the automaker warned that rising prices and rising interest rates would start to weigh on its sales in the coming months.
OIL
Oil prices are in the red with the strong rise of the dollar and fears of a slowdown in demand in the event of an economic recession.
Brent lost 0.82% to 95.37 dollars a barrel and American light crude (West Texas Intermediate, WTI) lost 1.27% to 88.86 dollars.
(Laetitia Volga, editing by Kate Entringer)
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