The Paris Stock Exchange is expected on a hesitant note after the announcement of a major increase in interest rates by the US Federal Reserve to curb inflation. Investors are wondering about the continuation of the monetary policy normalization campaign in the United States.
The Fed raised the federal funds rate by 75 basis points, the biggest increase since 1994. A gesture widely anticipated by the markets since the announcement last Friday of an acceleration in the rise in consumer prices at 8.6% over one year, a level not seen since December 1981, especially since five-year inflation expectations in the University of Michigan survey came out at their highest since June 2008.
Towards an increase of the same magnitude in July?
The rate of Fed-funds is now in a range of 1.5% to 1.75% and the central bank plans further hikes this year, but its chairman Jerome Powell has indicated that deep tightening should not be the norm during the future meetings of the monetary policy committee. He nevertheless hinted at a 50 to 75 basis point hike in July and said he was confident in the objective of controlling inflation, while conceding that this ” will take time “.
The Federal Reserve expects the fed funds rate to be at 3.4% at the end of the year and at 3.8% in 2023, according to the famous “dot plot”, a dot chart illustrating members’ expectations. of the monetary policy committee. Finally, the growth forecast was lowered from 2.8% to 1.7% for 2022, while that concerning inflation was raised from 4.3% to 5.2%.
The Bank of England enters the fray
Wall Street hailed the Fed’s commitment to fighting inflation with a 1.5% rise in the S&P 500 and 2.5% in the Nasdaq Composite. Reflecting the prospect of forthcoming monetary tightening, the yield on the 2-year US bond, which reflects inflation expectations, tightened by 6 basis points to 3.2525% this morning, and that of the maturity at 10 years by 3 basis points to 3.3163%.
The market awaits the midday monetary decision of the Bank of England, which should raise its repo rate by a quarter of a percentage point to 1.25%. The afternoon will also be driven by three US indicators: housing starts, weekly jobless claims and the Philadelphia Fed activity index.
Dassault Systèmes confirms its objective
Dassault Systems confirmed its earnings per share target of 1.20 euros by 2024 ahead of an investor day.
Wendel reported on the decision of the chairman of the executive board, André François-Poncet, to step down, adding that the name of his replacement would be announced during the second half of the year.
Saint Gobain. Moody’s raised the group’s rating from “Baa2” to “Baa1”, with a stable outlook. The rating agency particularly welcomes ” the strong operational performance in 2021 and the sustained momentum of the first months of 2022 from the manufacturer of building materials.
Engie said it had seen a drop in gas deliveries after new restrictions on exports decided by Moscow, adding however that the group’s customers were not affected by the situation.
Among the analyst ratings, JPMorgan raised its recommendation on Euronext from “neutral” to “outperforming”.