by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to fall on Friday amid fears over changes in interest rates after announcements from several central banks, including the American Federal Reserve (Fed) and the Bank of England (BoE) while activity indicators in Europe are expected during the day.

According to the first available indications, the Parisian CAC 40 should lose 0.17% at the opening, the Dax in Frankfurt 0.32% and the FTSE 100 in London 0.19%. The EuroStoxx 50 index is expected to decline by 0.21%.

Rate fears have returned to markets since the Fed warned that its monetary policy could remain at a restrictive level for longer than expected, as the battle against inflation is far from over, according to its president Jerome Powell.

Goldman Sachs has pushed back a possible Fed rate cut to the fourth quarter of 2024.

In addition to the Fed, several ECB officials, such as Joachim Nagel and Martins Kazaks, have also warned of persistent inflationary pressures, deeming any debate on a rate cut premature, while UBS said it expected that the The Frankfurt institution will maintain the level of its rates unchanged until June 2024 before a reduction of 25 basis points per quarter.

The Bank of England, for its part, interrupted its long series of interest rate increases on Thursday, but warned that it would not take the recent fall in inflation in the United Kingdom for granted, adding that it was ready to increase again the cost of credit if necessary.

The Swedish and Norwegian central banks have already tightened their monetary policy, without ruling out further rate increases, while the Swiss National Bank (SNB) has opted for the status quo.

“There are a lot of mixed messages and information, and often these arise around key moments,” said Craig Ebert, economist at BNZ, adding that markets generally sense risk when indices are at a peak.

Beyond monetary policy, investors are waiting from 07:15 GMT for the monthly PMI indices which could provide indications on the economic outlook.

A WALL STREET

The New York Stock Exchange ended sharply lower on Thursday, as investors’ appetites were weighed down by the Fed.

The Dow Jones index fell 1.08%, or 370.46 points, to 34,070.42 points.

The broader S&P-500 lost 72.20 points, or 1.64%, to 4,330 points.

The Nasdaq Composite fell 245.14 points (1.82%) to 13,223.99 points.

Particularly sensitive to interest rates, high-growth stocks like Amazon, Nvidia and Apple finished in the red, weighing on the S&P-500 and the Nasdaq which fell to their lowest levels since June.

Citing interest rates, but also the strike of the main union of American auto workers, a possible partial closure of the American federal administrations next month, or even oil prices, Thomas Martin, portfolio manager at GLOBALT, said the prospect of a soft landing for the economy was fading.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index fell 0.41% to 32,436.69 points and the broader Topix fell 0.07% to 2,381.77 points as the close approached.

At the end of two days of meetings, the Bank of Japan (BoJ) stuck to its ultra-accommodating monetary policy on Friday and made no change to its outlook.

The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) fell to a ten-month low before rebounding by 0.40%, mainly supported by the markets in Hong Kong and China.

In China, the Shanghai SSE Composite advanced 0.68% and the CSI 300 gained 0.89% as public broadcaster CCTV reported that regulatory authorities announced a series of measures aimed at promoting the development of private economy.

VALUES TO FOLLOW IN EUROPE:

EXCHANGES/RATES

The yen lost up to 0.4% against the American greenback, to 148.09 per dollar after the BoJ’s decision to leave its rates unchanged and maintain its policy of controlling the yield curve.

The American currency also progressed (+0.07%) against a basket of reference currencies, including the euro which trades at 1.0652 dollars (-0.06%).

The pound sterling, which fell the day before to 1.22305, a six-month low, after the BoE’s decision to opt for the status quo, fell again on Friday by 0.1%, to 1.2282 dollars.

On the bond market, the yield on ten-year US Treasury bonds increased further, by a little more than one basis point, to 4.4966%.

OIL

The oil market is on the rise again, supported by fears of a supply deficit, as Russia temporarily banned, with immediate effect, exports of gasoline and diesel to all countries except Russia. Belarus, Kazakhstan, Armenia and Kyrgyzstan.

Brent rose 0.62% to $93.88 per barrel and American light crude (West Texas Intermediate, WTI) rose 0.76% to $90.31.

(Written by Claude Chendjou, edited by Nicolas Delame)

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