Risk appetite drives stocks after Fed and SNB

by Claude Chendjou

PARIS (Reuters) – Wall Street is expected to rise on Thursday at the opening and the European stock markets, apart from Paris, are also in the green at mid-session in a context of appetite for risk and a rush on raw materials.

A situation following the announcements of the American Federal Reserve (Fed) and the Swiss National Bank (SNB), which will be followed by those of the Bank of England (BoE).

Futures on New York indices signal an opening on Wall Street up 0.22% for the Dow Jones, 0.31% for the Standard & Poor’s 500 and 0.68% for the Nasdaq the day after a session already in the green.

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In Paris, around 11:10 a.m. GMT, the CAC 40 fell 0.2% to 8,145.45 but reached a record during the session at 8,229.25, in volatile exchanges marked by a new drop in Kering (-1.52%) and other luxury values ​​following the warning from Gucci’s parent company. In Frankfurt, the Dax, which reached a historic peak at 18,177.9 points, advanced 0.24%. In London, the FTSE, rich in basic resources, gained 0.92%.

The pan-European FTSEurofirst 300 index increased by 0.36%. The EuroStoxx 50 in the euro zone rose 0.5% after hitting an unprecedented high of 5,058.91 points. The Stoxx 600, also on a record at 510.07 points, advanced 0.43%.

Market enthusiasm is driven by expectations of rate cuts in Europe and the United States, with the American Federal Reserve (Fed) having confirmed on Wednesday after two days of debate that it still planned to reduce by 75 basis points borrowing costs this year, despite the strength of inflation and the economy across the Atlantic.

“The catalyst for risk sentiment is simply the Fed suggesting it has greater tolerance for higher price pressures and, despite the upside surprises in recent data, it is still on the path to easing,” explains Laura Cooper, strategist at BlackRock.

Analysts at Oddo BHF Suisse forecast Fed rate cuts of 25 basis points in June, September and December.

Without waiting for this deadline, in Switzerland, the SNB surprised the market on Thursday by lowering its main key rate by 25 basis points to bring it down to 1.50%, thus becoming the first of the major central banks to relax its monetary policy.

The Central Bank of Norway (Norges Bank) maintained its main key rate at 4.5% but suggested that an easing could take place in the fall.

Investors are now awaiting announcements at 12:00 GMT from the BoE, which should opt for an immediate status quo on its rates and give clues on the future trajectory of borrowing costs and the economy.

In the euro zone, financial markets are currently counting with a probability of 85% on a rate cut by the European Central Bank (ECB) in June, compared to a probability of 80% the day before.

In addition to monetary policy, the preliminary PMI activity indices in the euro zone are also on today’s agenda, the services sector having improved in March, while that of industry has deteriorated.

VALUES TO FOLLOW AT WALL STREET

Chip manufacturer Micron Technology soars 16.8% in pre-market trading after publishing a surprise quarterly profit and announcing that it expects revenue for the current quarter to be higher than expected.

In its wake, Intel and Nvidia are more than 1% ahead of the market, while Western Digital jumps 6%.

VALUES IN EUROPE

The positive trend in Europe is supported firstly by basic resources (+2.2%) in the wake of the rise in the prices of most metals, following the Fed’s projections on the reduction of its key rates.

The new technologies sector and that of real estate, also sensitive to rate fluctuations, took 2.08% and 1.8% respectively.

In values, in Paris Worldline advances by 2.33% after the announcement of the appointment of Wilfried Verstraete as future chairman of the group’s board of directors.

Rémy Cointreau rose 2.33%, with Deutsche Bank moving from “hold” to “buy” on the spirits manufacturer.

In London, Next rose 4.95% thanks to a confirmation of its sales and profit forecasts for the current financial year after having reported a better profit than expected for 2023-2024. The distribution index on the Stoxx 600 increased by 1.46%.

RATE

Sovereign yields are falling logically in Europe and the United States, with the German ten-year yielding more than four basis points, to 2.398, while its American equivalent also drops around four points, to 4.2314%.

CHANGES

The Swiss franc fell sharply on Thursday against the dollar, by 0.65% to 0.8926, and reached its lowest level since July 2023 against the euro, at 0.9782, in reaction to the SNB’s announcements.

The dollar rises slightly (+0.21%) against a basket of reference currencies.

The euro is trading unchanged at 1.0918 and the pound sterling at 1.2764 dollars (-0.16%).

OIL

The oil market is practically stable after its recent rise, the announcement of the decline in crude stocks last week and the Fed’s decisions limiting the impact of profit-taking on oil

Brent lost 0.19% to $85.79 per barrel and American light crude (West Texas Intermediate, WTI) lost 0.23% to $81.08.

GOLD

The yellow metal hit a historic high on Thursday at $2,222.39 per ounce in the wake of the decline in bond yields in the United States, with the Federal Reserve maintaining its forecast of three rate cuts for this year.

(Writing by Claude Chendjou, edited by Kate Entringer)