Exit the rebound attempt this morning. Up 0.93% shortly after the opening, the Paris Stock Exchange quickly did an about-face before accentuating its losses in the wake of Wall Street. Nervousness dominates on the eve of the Fed’s monetary decision, which should opt for a new monetary super-tightening at the risk of causing a hard landing for the American economy.
The Bank of Sweden announced this morning a 100 basis point increase in its interest rates, a gesture of unprecedented magnitude in nearly 30 years. The Riksbank, which acknowledges having been surprised by stronger than expected inflation, expects a further acceleration, which suggests further rate hikes. Within the euro zone, producer prices soared 45.8% year on year in Germany last month, an unprecedented level, against 37.2% in July when the market hoped for a slowdown to 36, 8%.
Shortly after 4 p.m., the Bedroom 40 fell 1.49% to 5,971.46 points in a still narrow business volume of 1.3 billion euros. In New York, the Dow Jones loses 1.27%, the S&P500 1.28% and the Nasdaq Composite 0.94%. Component of the extended index, Ford Engine fall more than 8% after warning that its costs will exceed its forecast of $ 1 billion in the current quarter.
75 or 100 basis points?
The Federal Reserve should opt tomorrow evening for a third consecutive hike of 75 basis points in the Fed funds rate. They would thus pass within a margin of 3% to 3.25%, against 2.25% to 2.5% currently. A more severe gesture is not ruled out. According to CME Group calculations based on contracts future on Fed funds, the probability of a one percentage point tightening is estimated at 18%, compared to 19% yesterday, 31% a week ago and 0% before the publication of inflation figures for the last month in the UNITED STATES.
” The Fed has nothing to gain by surprising the markets with a stronger-than-expected hike “Summarized this morning Ipek Ozkardezkaya, analyst at Swissquote, in his note of the day. Based on this assumption, it estimates that the announcement of a 75 basis point hike tomorrow would constitute ” a relief for the dollar and the equity markets, insofar as it would make it possible to unanchor the scenario of a hike of 100 basis points “.
The Fed will also unveil tomorrow evening its new economic projections, as well as its estimates concerning the evolution of interest rates, the famous dot plot. These could reach or even exceed 4% at the end of the year, against 3.4% estimated in June. ” We believe estimates for late 2023 will suggest a prolonged period of high rates, even after their final level, which we now estimate around 5%, down from 4% previously, is reached early next year. writes John Velis, US Forex and Macro Strategist at BNY Mellon. He observes, however, that history suggests that once the last rate hike takes place, rates tend to hold for about six months before starting to fall “.
Euronext degraded, Air France optimistic
On the bond market, the yield on the 10-year US bond is tending to 3.5807% after crossing the 3.5% threshold yesterday for the first time since 2011. More sensitive to changes in expectations of short-term inflation, that of the 2-year maturity is trading at 3.9792%, thus approaching the 4% threshold, unprecedented since 2007.
Sensitive to changes in interest rates, technology stocks are generally down. Capgemini loses 3.3%, Teleperformance 4.6% and Dassault Systems 1.8%.
The French Games (FDJ) rose 2.4%. The gambling operator has announced that it is in exclusive negotiations with a view to acquiring ZEturf, the second largest operator in the French online horse racing betting market.
Euronext gives up 5.1%. Credit Suisse has downgraded the title of the stock exchange platform from “outperformance” to “neutral”.
Finally, Air France-KLM garners 4.1%. Its subsidiary Air France has announced that its entire fleet will be in operation for the 2022-2023 winter season and that the level of capacity across the entire network will be close to that of winter 2019.