by Laetitia Volga
PARIS (Reuters) – Most European stocks ended close to balance on Thursday, paring losses in the wake of Wall Street and technology stocks, on hopes of a pause in the US rate hike cycle.
The London market closed more clearly in the red, penalized by the decline of the banks and the rate hike by the British central bank.
In Paris, the CAC 40 gained 0.11% to 7,139.25 points. The British Footsie lost 0.89% and the German Dax 0.04%.
The EuroStoxx 50 index advanced 0.27%, the FTSEurofirst 300 fell 0.22% and the Stoxx 600 0.21%.
At the time of the close in Europe, Wall Street was trading higher, with the Dow Jones taking 0.89%, the S&P-500 1.12% and the Nasdaq Composite 1.77%.
At the end of its two-day meeting, the Fed on Wednesday hinted at a pause in the rise in its rates although its chairman, Jerome Powell, reaffirmed his commitment to fight against inflation.
US rate futures are pricing in that there is about as much chance of the Fed raising rates an additional 25 basis points in May as there is of a status quo.
They also predict that by the end of the year, the central bank will lower the federal funds rate target to 4.13%.
In the rest of the monetary news, the central banks of Switzerland, Norway and the United Kingdom in turn raised their key rates on Thursday.
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VALUES
The technology sector was the day’s best performer as the bond market eased. Its Stoxx index took +2.18% and in Paris, STMicroelectronics gained 1.72%, ahead of the CAC 40 only by Sanofi (+5.48%).
The pharmaceutical group announced that Dupixent, developed with Regeneron, had met all its evaluation criteria in a phase III trial on “smoker’s bronchitis”.
The banking compartment lost 2.53%.
Citigroup lowered its recommendation on the sector, warning that the rapid pace of interest rate hikes would continue to weigh on economic activity and earnings.
In Paris, BNP Paribas and Société Générale lost more than 2% and Crédit Agricole around 1%. In London, HSBC dropped 2.9%.
CHANGES
The prospect of moderating monetary tightening in the United States is hurting the dollar and the government bond market.
The greenback, which continues its sixth session of decline, gives up 0.22% against a benchmark basket. The euro, meanwhile, rose to nearly $1.089 after a seven-week peak at 1.0929.
RATE
On the bond market, the yield of ten-year Treasuries fell by five basis points, to 3.4509%, that of two years sank further below 4%.
In their wake, Eurozone yields also lost quite a bit of ground, ending at 2.186% for the German 10-year and 2.714% for the French.
“European bond yields are falling alongside those in the US after the Fed hinted that we were nearing the end of the bullish cycle,” said Antoine Bouvet, senior strategist at ING.
“It’s not as safe for the European Central Bank, but the markets, quite rightly to some extent, are trading as if there is a strong correlation between Fed policy and ECB policy.”
OIL
After reaching their lowest level since the end of 2021 at the start of the week, oil prices continue to rise, supported by rising gasoline prices in the United States and a weaker dollar.
Brent rose to $76.44 a barrel and US light crude (West Texas Intermediate, WTI) to $70.57.
(Laetitia Volga, edited by Matthieu Protard)
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