The Fed stokes recession fears, Tokyo to the rescue of the yen


File photo of the sign for Wall Street outside the New York Stock Exchange in Manhattan

PARIS (Reuters) – Wall Street is expected to rise slightly on Thursday after the slump caused the day before by the Federal Reserve’s announcements, while European stock markets fell, penalized both by the almost general tightening of monetary policies and the renewed of geopolitical tension.

The currency market is driven by the intervention of the Japanese authorities in support of the yen, a first since 1998.

Futures on major New York indices are signaling an opening up 0.18% for the Dow Jones, 0.23% for the Standard & Poor’s 500 and 0.19% for the Nasdaq.

In Paris, the CAC 40 lost 0.64% to 5,992.63 points around 10:35 GMT. In London, the FTSE 100 lost 0.28% and in Frankfurt, the Dax dropped 0.5%.

The EuroStoxx 50 index is down 0.5%, the FTSEurofirst 300 0.75% and the Stoxx 600 0.73%.

The three major US indices lost more than 1.7% on Wednesday after the Fed’s announcement of a new rate hike and statements by its chairman, Jerome Powell, auguring continued monetary tightening and a marked slowdown in the economy, inevitable according to him to stem inflation, even if he refrained from pronouncing the word “recession”.

“We fully agree that a brutal remedy is necessary to restore price stability. But we fear that its side effects will be harsher than what the Fed currently foresees”, comments Christian Scherrmann on Thursday, US economist at DWS.

In Europe, the Swiss National Bank (SNB) also raised its key rate by three-quarters of a point, thus breaking with negative rates, and Norges Bank, the Norwegian central bank, opted for a hike of half a point. point, leaving the door open for further tightening.

The Bank of England is expected to announce at 11:00 GMT a further rate hike of at least 50 basis points.

This synchronized movement further isolates the Bank of Japan, which has chosen to maintain its ultra-accommodative monetary policy, thus widening the rate differential with the other major developed economies. A discrepancy that led the Japanese authorities to intervene directly in the currency market.

CHANGES

The yen immediately took advantage of this intervention: when it approached 146 for the dollar at the start of the day, the lowest in 24 years, it rose to around 143.

But it remains down more than 23% since the start and its rebound may be short-lived. “As long as the Fed sticks to its firm stance of raising rates, any intervention in the yen should slow the decline of the yen without interrupting it,” said Ben Laidler, market strategist at eToro in London.

The euro, for its part, regained some ground at 0.9879 dollars (+0.43%) after the low of 20 years hit on Wednesday at 0.9807.

As for the pound sterling, it gained 0.65% against the greenback but remained close to its 37-year lows (at 1.1213) pending the decisions of the BoE.

RATE

The British two-year yield, the most sensitive to expectations of changes in key rates, rose by more than seven basis points to 3.452%, but the ten-year yield fell to 3.29%.

This development, which reflects fears that rising rates will weigh on growth, is reflected in the euro zone: the German two-year hit a new 11-year high at 1.897% while the ten-year returned to 1.853. %.

On the American market, the two-year, driven by the upward revision of key rate expectations, continues to soar to 4.0966% but the ten-year, which had fallen on Wednesday, rose to 3.534%.

VALUES IN EUROPE

On the equities side in Europe, the multiple rate hikes are still hurting technology stocks, whose Stoxx index fell by 1.82%.

The transport and leisure compartment (-1.76%), he suffered from the fall of 7.43% of Accor after the lowering of the recommendation of JPMorgan to “underweight”.

On the rise, the banking compartment (+1.49%) is benefiting from the prospect of an improvement in its credit margins.

The Spanish Sabadell also takes 4.92%. Several sources told Reuters that the group had received non-binding offers from Worldline (+1.17%), Nexi and Fiserv for its payments division.

OIL

The oil market is benefiting from signs of a rebound in Chinese demand and the geopolitical context, but it only erased a small part of the losses suffered on Wednesday in reaction to the Fed’s speech.

Brent gained 0.42% to 90.21 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.55% to 83.40 dollars.

They had yielded respectively 0.87% and 1.78% the day before.

(XXX report, French version Marc Angrand)

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