Rise in sight in Europe after Wall Street on the eve of the Fed – 09/20/2022 at 08:49


The price of the CAC 40 index and information on company stock prices are displayed on screens suspended above the Paris Stock Exchange

PARIS (Reuters) – The main European stock markets are expected to rise on Tuesday after Wall Street’s positive close but the rise could be limited on the eve of the decisions of the United States Federal Reserve, the extent of the new rise in US rates remaining the big unknown for investors.

Index futures suggest a rise of 0.59% for the CAC 40 in Paris, 0.34% for the Dax in Frankfurt, 0.68% for the FTSE 100 in London and 0.29% for the EuroStoxx 50.

The broad European Stoxx 600 index posted its lowest closing level since July 14 on Monday after five consecutive sessions of decline and the CAC 40 broke through the 6,000 point threshold in session for the first time since July 15.

But the American indices amplified their progression at the end of the session, a momentum which then spread to the major Asian markets.

The Federal Open Market Committee (FOMC) of the Fed must open in a few hours the debates which will lead to a new sharp rise in rates on Wednesday in an attempt to finally bring down inflation for a long time.

The money markets still favor the hypothesis of a three-quarters point increase in the rate target of the “fed funds” but that of a rise of 100 basis points remains considered probable at 19% according to the time barometer real FedWatch. Beyond that, investors also expect the US central bank to provide some response on the “neutral” or “pivot” level of rates, which should be reached at the beginning of next year.

The next two sessions are therefore likely to be marked by small differences, especially since the Fed meeting will be followed by those of the Bank of Japan, the Swiss National Bank and the Bank of England, among others on Thursday. .

Their decisions are all the more expected as fears of recession have increased markedly in recent weeks, leading to growing doubts about the earnings prospects of listed companies and therefore their valuation, ten days now from the end of the third quarter. .

“The main question in the markets right now is how much higher will rates have to go and whether there will still be a lot of earnings warnings like the one FedEx issued last week,” he said. Michael Hewson, chief analyst of CMC Markets.

In terms of economic indicators, producer prices in Germany exceeded estimates in August and set a new record with an increase of 7.9% compared to July and 45.8% over one year.

AT WALL STREET

The New York Stock Exchange ended a seesaw session higher on Monday in reduced volumes, as uncertainty about the extent of the upcoming rate hike complicated the task of investors.

The Dow Jones Index gained 0.64%, or 197.26 points, to 31,019.68, the Standard & Poor’s 500 gained 26.58 points, or 0.69%, to 3,899.91 and the Nasdaq Composite rose. advanced by 86.62 points (+0.76%) to 11,535.02.

The technology sector, very sensitive to the economic situation, recovered a little, like Apple (+2.50%), Tesla (+1.88%) or Nvidia (+1.39%).

Futures so far suggest an open up around 0.2%.

IN ASIA

On the Tokyo Stock Exchange, which remained closed on Monday, the Nikkei index ended up 0.44%, thanks among other things to the rebound in technology stocks.

In China, the Shanghai SSE Composite gained 0.16% and the CSI 300 0.06%. The People’s Bank of China (PBC) left its main key rates unchanged at its monthly fixing, a status quo without surprise against a backdrop of persistent weakness in the yuan.

EXCHANGES/RATES

The dollar lost some ground against the other major currencies (-0.04%) but moved only 1% below the 20-plus-year high recorded on September 7.

The euro took the opportunity to rise to just above parity, at 1.0027 dollars, but the yen, at 143.36 to the dollar, has already given up its gains at the start of the session.

RATE

On the bond market, the US two-year yield stands at 3.9601% after rising at the start of the day on Monday to 3.97%, its highest level since November 2007.

The ten-year fell slightly, to 3.4887%, the day after a peak at 3.518%, the highest since April 2011.

In Europe, the ten-year German takes two basis points in the first exchanges to 1.81%.

OIL

The oil market is trading on narrow spreads after its rise on Monday, as investors await Fed decisions to try to assess their impact on global demand for crude in the coming months.

Brent climbed 0.21% to 92.19 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.03% to 85.76 dollars.

(Written by Marc Angrand, edited by Matthieu Protard and Kate Entringer)

.

Leave a Comment

Your email address will not be published.