The Paris Stock Exchange folds pending the Fed’s monetary decision, scheduled for 7 p.m. A fourth consecutive increase of 75 basis points in the Fed Funds rate, which would bring it within a margin of 3.75% to 4%, is widely expected. But investors are especially awaiting Jerome Powell’s press conference, which should signal an adjustment in the scale of the next rate hikes.
The market erased its initial advance in reaction to the continued contraction of manufacturing activity in the euro zone. The PMI index calculated by S&P Global fell by 2 points to 46.4 in October, its lowest level since May 2020, signaling a deterioration in the economy for the fourth consecutive month.
Mid-session, the Bedroom 40 lost 0.15% to 6,318.81 points, after a peak at 6,376.29 (+0.75%), in a business volume of around 650 million euros. The contracts future on American indices evolve in dispersed order.
Towards moderation in rate hikes
Investors are waiting for Jerome Powell to signal at his post-FOMC press conference a reduction in the magnitude of upcoming tightening beginning in December. Macro and forex strategist at BNY Mellon, John Velis considers the prospect of a moderation in the magnitude of the next rate hikes to be “reasonable”.
“ In his opening remarks at the July press conference, Powell said it ‘will likely be appropriate to slow the pace of hikes as we assess how the cumulative effect of monetary adjustments affects the economy and inflation’ . This was repeated at the September press conference, almost verbatim. The expert adds that the simple arithmetic as to the final rate (…) which should peak at 5% in March 2023, implies that after a 75 basis point hike on Wednesday, the Fed funds target rate (in its upper part) would be at 4%, which would still leave 100 basis points for reach this final rate. This implies, in our view, two meetings (in December and February) at 50 basis points, followed by a break “. So ‘pivot’ or inflection in Fed policy? ” We believe this is more of a normal development in a monetary tightening cycle “, specifies the strategist.
Jerome Powell on eggs
” We believe that Chairman Powell will redouble his efforts to avoid saying anything that could be interpreted as a sign that an inevitable reduction in the magnitude of rate hikes is a shift towards the end of the monetary tightening cycle. “Abounds Kevin Cummins, chief economist at NatWest Markets, quoted by Reuters. The question remains all the more open since by the December meeting, the Fed will have taken note of two new statistics concerning inflation and employment, including that of October, scheduled for Friday.
In the meantime, the markets will watch, this afternoon, the ADP survey on private employment in the United States in October, as well as the non-manufacturing PMI index across the Atlantic.
Profit taking on Imerys
Auto parts makers retreat as Aston Martin warned that global supply chain issues have delayed its expected improvement in results, while slashing its 2022 delivery and margin forecast. Valeo loses 5.1% and Faurecia 4.3%.
Sodexo down 1.7%. The collective catering group has announced that it is aiming for organic growth in its turnover of between 6% and 8% for the 2024 and 2025 financial years and a margin of more than 6% in 2025. However, this would represent a slowdown compared to forecasts for 2023 of organic revenue growth of between 8% and 10%. In the same sector, Elior bends by 5%.
Imerys loose 5.5% the day after a jump of 30% on the announcement of the opening, by 2027, of a lithium deposit in the Allier. The industrial mineral producer confirmed its profitability targets for 2022 after recording organic growth of 13.3% in the third quarter and 14% in the first nine months of the year. But, due to the war in Ukraine, confinements in China and the weakness of the automotive sector, the volume of sales fell by 4.3% over nine months.