PARIS (Reuters) – European stock markets ended lower on Thursday, after the monetary policy meeting of the American Federal Reserve which reaffirmed its restrictive bias.
In Paris, the CAC 40 dropped 1.59% to 7,213.9 points, while the German Dax lost 1.33%. The UK Footsie fell 0.69%, falling less than its European peers after the Bank of England (BOE) paused its rate hikes.
The EuroStoxx 50 index ended the session down 1.48%, compared to 1.26% for the FTSEurofirst 300 and 1.3% for the Stoxx 600.
The Fed announced on Wednesday that it was maintaining the Fed Funds rate target at 5.25%-5.50%, while warning that it could raise it again if inflation proved more persistent than expected.
The central bank’s economic forecast backed the Fed’s warning, with board members expecting another rate hike by the end of the year, while rates would only fall by 50 basis points in 2024 – compared to a 100 bps decline forecast in the June projections.
In fact, inflation would not return to its target before 2026, which justifies maintaining a more restrictive monetary policy for longer.
“We still believe that central bankers are currently managing market expectations towards a longer-term higher rate scenario, which helps reduce inflation without increasing pressure on the economy through higher interest rates”, note the DWS economists.
Furthermore, the BOE announced Thursday that it would maintain its key rate at 5.25%, contrary to market expectations, while noting that inflation continued to decline.
VALUES
Hermès fell 5.85% on the stock market on Thursday, at the bottom of the CAC 40, after a change of recommendation from Oddo BHF which highlights the deterioration of the prospects for the luxury sector.
Ocado tumbled 19.87%, its worst performance in ten months, at the bottom of the Stoxx 600, after Exane lowered its recommendation from “neutral” to “underperform”, citing sluggish retail growth.
The retail sector posted the best sectoral performance of the Stoxx 600, up 0.16%, supported by British groups which rose after the BOE decision. JD Sports Fashion, Next Plc, Marks and Spencer, gained between 2.16% and 9%.
A WALL STREET
Wall Street is falling at closing time in Europe, under pressure from the Fed’s projections and the Fed’s restrictive speech.
At closing time in Europe, trading on the New York Stock Exchange indicated a drop of 0.47% for the Dow Jones, compared to 1.01% for the Standard & Poor’s 500 and 1.18% for the Nasdaq. Composite.
RATE
US long-term rates are suddenly readjusting following the Fed’s announcements, with investors taking into account that key rates could remain higher for longer.
The ten-year Treasury yield jumped 13.7 bps to 4.484%, hitting a 16-year high during the session, while the two-year rate gained 1.3 bps to 5.1331%.
The German ten-year yield increased by 4.2 bps to 2.745%, while that of the two-year rate was stable at 3.264%.
CHANGES
The dollar is rising, supported by higher rate expectations, while the pound sterling is falling, under pressure from the BOE’s more accommodative posture.
The dollar advanced 0.19% against a basket of benchmark currencies, hitting a six-month high during the session, while the euro remained stable at $1.0663.
The pound sterling fell 0.38% to $1.2297, hitting a six-month low during the session.
OIL
Crude oil is rising moderately, supported by the Russian decision to suspend exports of fuels, including gasoil and diesel, in order to stabilize prices on its domestic market.
Brent nibbles 0.27% to $93.78 per barrel, American light crude (West Texas Intermediate, WTI) rising 0.52% to $90.13.
(Written by Corentin Chappron, edited by)
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