by Laetitia Volga

PARIS (Reuters) – European stock markets ended in the green on Wednesday as caution prevailed on Wall Street before the release of the Federal Reserve (Fed) statement.

In Paris, the CAC 40 gained 0.28% to 7,403.83 points. The British Footsie gained 0.2% and the German Dax 0.56%.

The EuroStoxx 50 index ended up 0.36%, the FTSEurofirst 300 0.34% and the Stoxx 600 0.31%.

At the time of the close in Europe, Wall Street was moving in mixed order: the Dow Jones fell 0.2%, the Standard & Poor’s 500 was stable and the Nasdaq Composite gained 0.3%.

The Fed is expected to announce at 6:00 p.m. GMT a further increase in the rate target for “fed funds”, its main instrument of monetary policy. But this new tightening, which aims to curb inflation, is very broadly priced in and investors are above all awaiting indications on the path of rates beyond this meeting.

The market strongly believes that the Fed is going to take a break and it will be forced to move quickly from raising to lowering rates, said Steven Ricchiuto at Mizuho Securities USA.

Recent price data suggests inflation is persistent but markets are obsessed with the idea that a systemic credit problem is looming, the investment bank’s chief economist added.

Fed Chairman Jerome Powell “will try to present a balanced view because he has a divided (monetary policy, FOMC) committee,” said Steven Ricchiuto.

OIL

After falling more than 5% on Tuesday, the oil market is still falling on concerns about the pace of US growth with the Fed’s monetary tightening.

Brent fell 4.74% to 71.75 and US light crude (West Texas Intermediate, WTI) fell 5.09% to $68.01, both at their lowest in six weeks.

VALUES

The energy compartment (-0.78%) posted the biggest drop of the day.

At individual values, Stellantis lost 1.82% in Paris after showing cautious optimism for 2023 in its first quarter results.

BNP Paribas fell by 1.18% despite the announcement of a net profit multiplied by more than two over the period January-March. Also in the banking sector, UniCredit took 3.76% after raising its annual targets.

The German company Lufthansa lost 1.32% after quarterly results deemed “mixed” by analysts.

CHANGES

The dollar retreats ahead of what could be the Fed’s last rate hike in this cycle: the index measuring its movements against a basket of benchmark currencies is down 0.54%.

The euro, however, rose 0.43% to 1.1046. The European Central Bank (ECB) is expected to raise rates by 25 basis points on Thursday, with a 50 basis point hike also possible but considered less likely.

“Inflation data, especially those relating to services, do not allow the ECB to signal a pause at this time,” said Davide Oneglia at TS Lombard.

“The level at which the ECB will stop depends mainly on the occurrence of a US recession in the middle of the year and the response provided by the Fed,” added the economist.

RATE

On the government bond market, the ten-year German ended without much change at 2.248%. Its American equivalent yielded more than six basis points to 3.3824% while the two-year fell below 3.95%.

(Laetitia Volga, edited by Jean Terzian)

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