by Laetitia Volga
PARIS (Reuters) – European stock markets ended slightly higher on Wednesday pending monetary policy announcements from the Federal Reserve, with investors anticipating a moderate rate hike after turmoil in the banking sector.
In Paris, the CAC 40 gained 0.26% to 7,131.12 points. The British Footsie gained 0.41% and the German Dax 0.14%.
The EuroStoxx 50 index ended up 0.34%, the FTSEurofirst 300 0.25% and the Stoxx 600 0.15%.
At the time of the close in Europe, Wall Street was moving close to equilibrium, with the Dow Jones down 0.12%, the Standard & Poor’s 500 0.06% and the Nasdaq Composite taking 0.1%.
The Fed is expected to announce at 6:00 p.m. GMT a quarter-point increase in the “fed funds” rate target, predict the majority of observers, a choice that would reconcile its fight against inflation and a desire not to shake the financial system more.
But the probability of a status quo is not excluded, underlines Alexandre Baradez, head of market analysis at IG France.
“The risk of recession in the United States in the second half increased after the banking stress and the Fed will necessarily take this into account in its management of monetary policy,” he said in a note.
“The inertia of the effects of rate hikes already ‘on board’, the tightening of financial conditions post banking shock, the fall in headline inflation to 6% in February could very well push the Fed to do nothing. Knowing also that if the terminal rate was already reached (current range 4.50%-4.75%), there would still be balance sheet management as a standardization tool.”
Against this backdrop, investors are curious to hear what Fed Chairman Jerome Powell has to say about the crisis that has rocked global banks for the past two weeks and to see if any concern emerges in the news. projections of the American institution concerning the evolution of interest rates (‘dot plots’), inflation and economic growth.
The European banking sector (-0.16%) ended the day almost stable after rebounding 5.1% over the previous two sessions under the effect of concerted measures taken to avoid a destabilization of the global financial system.
The Stoxx real estate index (-3.79%) fell to its lowest level in five months, on expectations of rate hikes from the Fed and the Bank of England (Thursday).
Unibail-Rodamco-Westfield finished last in the CAC 40 with a fall of 7.50% and Klépierre lost 6.01%.
On the government bond market, the ten-year German advanced by more than five basis points at the end of the session to 2.33% while the two-year took nearly three points to 2.7%.
In the United States, yields started falling again, with analysts saying the market has already priced in a 25 basis point rate hike from the Fed.
The US 10-year and 2-year shed more than four basis points each, to 3.5638% and 4.1405% respectively.
The dollar fell slightly against the other major currencies (-0.12%) and the euro regained 0.29% around 1.0798.
With the retreat of the greenback, oil prices hit a one-week high, despite a surprise increase in crude inventories in the United States last week.
Brent gained 1.1% to 76.15 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.09% to 70.43 dollars.
(Written by Laetitia Volga, edited by Bertrand Boucey)
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