(News Bulletin 247) – The Paris Stock Exchange is expected to fall on Thursday morning, investors having to digest the willingness displayed by the Federal Reserve to continue its rate hikes despite concerns surrounding the health of the banking system.
Around 8:15 a.m., the ‘future’ contract on the CAC 40 index – April delivery – fell 14 points to 7133.5 points, announcing a slight decline at the opening.
Unsurprisingly, the Fed on Wednesday raised its federal funds rate target by a quarter point, while saying it was considering further rate hikes in the face of still higher-than-expected inflation.
Market players deduce that there could be one or two further increases of 25 points, but no third, which gives hope for a ‘pivot’ in the course of the second half.
Regarding the recent shocks experienced by the financial markets, the Fed acknowledged that the banking turbulence was likely to affect both growth and employment in the United States.
Faced with the vagueness maintained by the Fed on the timing of its next rate hikes, Wall Street ended on a note of weakness last night, the Dow Jones and the Nasdaq both down 1.6%.
In the foreign exchange market, the dollar suffered from the drop in the New York Stock Exchange and concerns about growth, with the greenback now trading around 1.0910 against the euro.
The risk aversion movement benefited bonds, driving down the yield on 10-year Treasuries – the benchmark loan in the United States – towards 3.50%.
Carried away by the fall on Wall Street, oil prices also started to fall again, the May contract on American light crude (West Texas Intermediate, WTI) losing 0.7% to 70.4 dollars.
Gold, the safe haven par excellence, took advantage of the decline on Wall Street and the dollar in a ‘flight to quality’ movement which carried the fine metal up 0.9% to 1,981.9 dollars an ounce, still at historic highs.
The day Thursday promises to be poor in economic indicators, but the exchanges could liven up at midday at the time of the decisions of the Bank of England (BoE).
While economists have so far expected a limited rate hike of 25 basis points, yesterday’s announcement of a re-acceleration of inflation in February argues, according to some, for an increase of 50 points.
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