by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to be slightly lower at the opening on Thursday the day after the announcements of the United States Federal Reserve (Fed) which left investors perplexed, the central bank having raised its rates as expected and evoked a break ahead as its chairman reiterated his commitment to fighting inflation.

Index futures suggest a decline of 0.20% for the CAC 40 in Paris, 0.19% for the Dax in Frankfurt, 0.25% for the FTSE 100 in London and 0.17% for the EuroStoxx 50.

The Fed on Wednesday announced a quarter-point hike in its main key interest rate but hinted that it was about to halt its rate hike cycle in the face of recent tensions in financial markets. The rate target for federal funds (“fed funds”) was thus raised to 4.75%-5.00%. However, half an hour after these announcements, Jerome Powell, the chairman of the Fed, stressed that other rate hikes could follow, if necessary, and that no cuts were expected this year.

Investors have also been shaken by statements by Janet Yellen, the US Treasury Secretary, who said in a Senate hearing that she was not considering a “blanket guarantee” for all bank deposits in the United States. .

“Even though he (Jerome Powell) seems to be ruling out rate cuts this year…much of the damage seems to come from Janet Yellen’s parallel comments to Congress just as Jerome Powell was insisting that the banking sector was safe,” Rob Carnell, an economist at ING, wrote in a note.

After the Fed, the market is now waiting at 12:00 GMT for monetary policy decisions from the Bank of England (BoE), which is under pressure the day after the publication of inflation figures in Great Britain showing a surprise acceleration of inflation at 10.4% over one year in February.

The money markets are counting with a 100% probability on an increase of at least a quarter of a point in BoE rates, while a pause was still envisaged before this statistic.

The Swiss National Bank (SNB) must also make its monetary policy decisions on Thursday and uncertainty remains over a rate hike of 50 basis points or 25 basis points after the emergency rescue of Credit Suisse, acquired by UBS. .

AT WALL STREET

The New York Stock Exchange ended sharply lower on Wednesday, after a jagged session, punctuated by the Fed’s press release and statements by Jerome Powell which gave rise to various interpretations.

The Dow Jones index fell 1.63%, or 530.49 points, to 32,030.11 points.

The broader S&P-500 lost 65.90 points, or 1.65%, to 3,936.97 points.

The Nasdaq Composite fell for its part by 190.15 points (-1.60%) to 11,669.96 points.

“The market was encouraged when it saw that the Fed was considering a full pause, then disappointed when Powell clarified that it did not have its hands tied and could continue raising rates if necessary,” he said. said Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended down 0.17% at 27,419.61 points and the broader Topix fell 0.29% to 1,957.32 points.

In China, the Shanghai SSE Composite gained 0.64% and the CSI 300 gained 0.99%.

The MSCI index comprising the values ​​of Asia and the Pacific (excluding Japan) rose 1%, to a two-week high, at 515.62 points.

CHANGES

The dollar is under pressure on Thursday, near a seven-week low, after announcements from the Fed suggesting an imminent end to the monetary tightening cycle. The greenback fell 0.42% against a basket of benchmark currencies, while the euro was at 1.0917 dollars (+0.57%).

The pound sterling took 0.55% to 1.2331 dollar before the announcements of the BoE and the Swiss franc is trading at 0.9147 dollar (-0.32%).

RATE

Yields on ten-year and two-year US Treasuries fell further on Thursday, by 4.7 basis points, to 3.45%, and 6.8 points, to 3.91%, respectively, as bond markets continued to rise. anticipate a pause in the Fed’s rate hike.

In Europe, ten-year and two-year German Bund yields fell 7.3 points, to 2.25%, and 12.2 points, to 2.57%, respectively.

OIL

Oil prices fell after three consecutive sessions of gains: Brent fell 0.53% to 76.28 dollars a barrel and American light crude (West Texas Intermediate, WTI) 0.65% to 70.44 dollars.

(Written by Claude Chendjou, edited by Bertrand Boucey and Kate Entringer)

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