by Laetitia Volga
PARIS (Reuters) – Wall Street is expected to open lower and European stocks fell mid-session on Thursday, the prospect of further sharp rate hikes in the United States, where inflation remains high and the labor market tight, discouraging a risk taking again.
Futures on New York indices signal a decline of 0.08% for the Dow Jones, 0.34% for the Standard & Poor’s-500 and 0.58% for the Nasdaq.
In Paris, the CAC 40 lost 0.48% to 7,289.95 around 12:35 GMT. In Frankfurt, the Dax dropped 0.52% and in London, the FTSE lost 0.6%.
The pan-European FTSEurofirst 300 index fell by 0.45%, the euro zone’s EuroStoxx 50 by 0.5% and the Stoxx 600 by 0.6%.
The latter is currently down 1.2% since the start of the week, mainly due to Jerome Powell’s statements to Congress on rates. Although the Fed Chairman assured on Wednesday that no decision had yet been made on the size of the next rate hike, he reaffirmed that an acceleration of monetary tightening was still possible and that the final level of rate could be higher than expected if the economic data justified it.
The publication of the monthly employment report on Friday and then on Tuesday of February’s inflation trend will therefore be followed with more attention than usual.
The estimated probability of a half-point rate hike this month is around 70%, according to the CME barometer FedWatch, and their terminal level could peak at 5.65% in September.
As for the European Central Bank, whose council meets next Thursday, rate expectations also continue to rise, with a deposit rate forecast at around 4.158% by the end of the year.
“The publication of new macroeconomic projections next week (…) will give a clear insight into the direction of the discussion within the ECB on rate hikes” beyond March, said Carsten Brzeski, at ING .
VALUES IN EUROPE
On the stock side, aircraft manufacturer Dassault Aviation climbed 11.40% to a record high after posting better-than-expected annual results.
JCDecaux plunges 12.69%, the group expecting a slowdown in its organic growth in 2023 turnover and no dividend payment.
Credit Suisse drops 4.86%, the bank having postponed the publication of its annual report after points raised by the market authority in the United States on its 2019 and 2022 accounts.
Fashion group Hugo Boss drops 1.97% after saying it expects sales to slow in 2023.
CHANGES
The dollar lost ground (-0.29%) after hitting a three-month peak the day before against other major currencies with expectations of US rates.
The euro rises to 1.0559 dollars.
Bitcoin is stabilizing after an intraday low since mid-February as cryptocurrency specialist Silvergate announced it would go into voluntary liquidation following the bankruptcy of FTX.
“Bitcoin investors have had time to digest this information. They are also much more focused on macro developments,” said James Butterfill, head of research at CoinShares.
RATE
On the bond market, the yield on ten-year US Treasury bonds takes two basis points, close to the 4% threshold. Its German equivalent, at 2.685%, gains more than four points.
OIL
The oil market is little changed, torn between fears about the consequences of the rise in interest rates, the surprise drop in crude inventories in the United States and hopes regarding Chinese demand.
Brent gained 0.31% to 82.92 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.25% to 76.85 dollars.
(Laetitia Volga, edited by Jean-Stéphane Brosse)
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