Market: The easing of rates supports stocks at the close


by Claude Chendjou

PARIS (Reuters) – European stock markets, except London, ended higher on Wednesday and Wall Street was also in the green at mid-session amid hopes of a drop in interest rates against a backdrop of slowing inflationary pressures and soft landing of the American economy.

In Paris, the CAC 40 ended with a gain of 0.24% to 7,267.64 points. The British Footsie, weighed down in particular by financial stocks after sources reported to Reuters that four banks had left the “Science Based Targets” climate initiative, supported by the United Nations, fell by 0.43%. The German Dax advanced more clearly, by 1.09%, thanks in particular to automobiles, in the wake of General Motors (+9.64%).

The EuroStoxx 50 index rose by 0.54%, the FTSEurofirst 300 by 0.37% and the Stoxx 600 by 0.43%.

At the close in Europe, the Dow Jones gained 0.11%, the Standard & Poor’s 500 0.16% and the Nasdaq 0.12%.

Ten of the eleven main sectors of the S&P 500 are in the green, with the new technologies index (+0.21%) in the lead, while the Russell 2000 index of small caps grows by 0.97%.

While waiting for the PCE price indicator in the United States, which will be published on Thursday, and the Fed’s Beige Book scheduled for this Wednesday at 7:00 p.m. GMT, the second estimate of the gross domestic product (GDP) of the United States confirmed resistance of the American economy, which would allow the Fed to bring prices down without falling into recession.

“Markets are starting to adjust to the idea that there will indeed be a soft landing and that lower interest rates or stable interest rates will prevail throughout 2024,” comments Peter Andersen, founder of Andersen Capital Management in Boston.

Christopher Waller, one of the Fed governors, also did not rule out on Tuesday evening a drop in the cost of credit in the United States in the coming months, while the president of the Atlanta Fed, Raphael Bostic , said on Wednesday that it expected a slowdown in economic growth and a continued decline in inflation in the United States.

In Germany, consumer prices slowed in November, to 2.3% year-on-year, driven by a drop in energy prices. Figures for the entire euro zone will be released on Thursday, but markets are also expecting a slowdown in inflationary pressures in the currency bloc.

A 110 basis point (bps) cut in European Central Bank (ECB) rates is currently forecast by money markets for 2024, compared to 95 bps on Tuesday.

VALUES IN EUROPE

In Paris, stocks linked to automobiles (+2.35%), new technologies (+1.65%) and real estate (+1.63%) recorded the best sectoral performances. This last sector, sensitive to variations in interest rates, reached a session peak since March.

In corporate news, TotalEnergies (-2.38%) suffered from the lowering of Jefferies’ advice to “keep”.

Philips (-3.66%) suffered from a warning from the health authority in the United States on its respiratory devices.

RATE

The yield on the ten-year German Bund fell by almost seven basis points, to 2.429%, after hitting a four-month low during the session, at 2.411%. The two-year fell almost ten points, to 2.821%.

In the United States, the yields for these two maturities are respectively 4.3033% (-4 points) and 4.6702% (-7 points).

EXCHANGES The dollar rebounded on Wednesday, by 0.19%, against a basket of reference currencies after falling the day before to a low of more than three months. The greenback, however, is heading towards a decline of 3.7% over the month of November as a whole, its biggest monthly decline in a year.

The euro stands at $1.0969 (-0.19%) and the pound sterling at $1.2685 (-0.06%).

OIL

The oil market is progressing on the eve of the OPEC+ ministerial meeting which could decide to further reduce its production quotas for next year.

Brent gained 0.75% to $82.29 per barrel and American light crude (West Texas Intermediate, WTI) gained 0.97% to $77.15.

TO BE CONTINUED THURSDAY:

(Written by Claude Chendjou, edited by Blandine Hénault)

Copyright © 2023 Thomson Reuters



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