(News Bulletin 247) – The Paris Stock Exchange is expected to open on a note of caution on Thursday morning following the US Federal Reserve’s decision to raise rates above 5%, a first since 2007.

Around 8:15 a.m., the ‘future’ contract on the CAC 40 index – expiring in May – fell 17.5 points to 7360 points, announcing the start of the session in negative territory.

The Fed put an end to several weeks of suspense yesterday evening by raising its key rates by 25 basis points, to bring them between 5% and 5.25%, a decision widely expected by the markets.

However, investors seem to be wondering how to interpret the statements of the Fed, which has shown itself to be both concerned about inflationary risks while paving the way for a pause in its monetary tightening cycle.

‘Even if inflation slows, the Federal Reserve will probably keep its rates at high levels until tangible signs of inflation control appear’, summarizes Srijan Katyal, trader at ADSS.

‘This should intensify the pressure on the equity and bond markets and strengthen the dollar’, predicts the professional.

Investors mainly noted that the US central bank seemed to rule out any rate cuts by the end of the year, which postpones the prospect of a possible easing to the 2024 deadline.

Following the verdict of the American central bank, Wall Street closed in the red on Wednesday, the Dow Jones lost 0.8% and the Nasdaq Composite lost nearly 0.5%.

After the Federal Reserve, the European Central Bank (ECB) should in turn announce an increase in its interest rates at the end of its Board of Governors scheduled for the morning.

Investors expect the institution to slow its pace of monetary tightening by opting for a 25 basis point hike, although the scenario of a 50 basis point screw cannot be ruled out given the persistence. inflation in the euro zone.

‘The work of the ECB is not finished’, believes Steven Bell, chief economist of Columbia Threadneedle Investments for the Europe region.

“Wage growth is expected to rise further to 4% in 2023, so we expect a succession of interest rate hikes through the end of the year,” he said.

Ten-year Treasuries yield goes up a bit in the outlook
to see US rates remain at high levels for many more months and go back above the 3.40% threshold.

The German 10-year is stabilizing around 2.24% pending announcements from the ECB.

The reaction to the Fed’s announcements is barely visible on the foreign exchange market, where the dollar continues to decline, returning to around 1.1085 against the euro.

Unsurprisingly, the decisions of the major central banks relegate to the background the results of companies, which are however numerous this morning with the publications of Airbus, ArcelorMittal, Infineon, Novo Nordisk or Volkswagen.

In the economic chapter, market participants will take note in the early morning of the PMI activity indices in the services sector, then industrial producer prices in the euro zone at 11:00 am.

In the United States are expected the figures for productivity, the trade balance and weekly registrations for unemployment benefits.

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