PARIS (Reuters) – The main European stock markets are expected to rise on Thursday at the opening, after the monetary policy decision of the Federal Reserve and before the meetings of the Bank of England and the European Central Bank.
Futures contracts suggest an opening up 1.15% for the Parisian CAC 40, compared to 0.88% for the FTSE in London, 1.1% for the Dax in Frankfurt, and 1.1% for the EuroStoxx 50.
The Federal Reserve, as expected, maintained the fed funds rate target at 5.25%-5.50% on Wednesday for the third time in a row.
Above all, the central bank was accommodative, with its president, Jerome Powell, declaring during a press conference that rates were at their peak, or close to their peak, for this cycle of monetary tightening.
The institution’s economic projections, published on this occasion, also showed that those responsible for monetary policy expected 75 bp of rate cuts next year, compared to 50 bp expected during the last projections, in September.
“Although these projections do not fully reflect the 110 bps of rate cuts expected by the markets, this change of view has surprised and pushes investors to anticipate more cuts,” write ING strategists.
“Board of Governors Chris Waller’s views on inflation may be more widely shared than previously thought.”
Markets will await two more monetary policy meetings on Thursday: the Bank of England and the ECB will deliver their monetary policy decision at 12:00 GMT and 13:15 GMT respectively.
The two central banks are also expected to maintain their rates at their current levels, but investors will be attentive to the comments that monetary policy makers will make on this occasion: inflation remains above the institutions’ targets and bringing it back to the objective could necessitate keeping rates in restrictive territory longer than expected.
RATE
US yields fell after the Fed’s decision, with the 10-year falling below 4% for the first time since August, while the 2-year hit its lowest level since May.
The ten-year Treasury yield fell 6.4 basis points to 3.9488%, while the two-year rate fell 14.5 bps to 4.336%.
The German ten-year yield plunged 9.4 bps to 2.075%, to a 9-month low, while the two-year yield collapsed 15.1 bps to 2.503%.
VALUES TO FOLLOW:
A WALL STREET
The New York Stock Exchange ended sharply higher on Wednesday, with the Dow hitting a near two-year high, after the Fed left its benchmark rate at its current level and signaled that its monetary tightening cycle was coming to an end. with a likely drop in credit costs next year.
The Dow Jones index gained 1.40%, or 512.30 points, to 37,090.24 points. The broader S&P-500 gained 63.39 points, or 1.37%, to 4,707.09 points. The Nasdaq Composite advanced 200.57 points (1.38%) to 14,733.96 points.
IN ASIA
The Tokyo Stock Exchange ended down on Thursday, weighed down by automobile and banking stocks after the message from the Federal Reserve ending its tightening policy, which boosted the yen and lowered yields on US Treasury bonds. The Nikkei index lost 0.73% to 32,686.25 points and the broader Topix lost 1.43% to 2,321.24 points.
The automobile and parts sector fell 3.98%, the worst sector performance on the Tokyo Stock Exchange. Toyota Motor lost 3.82%, Honda Motor fell 5%.
Chinese indices ended mixed after the Fed’s decision. The Shanghai SSE Composite dropped 0.33%, the CSI 300 0.52%, the Hong Kong Hang Seng index gained 0.87%.
CHANGES
The dollar declines against the majority of currencies after the Fed’s accommodating meeting.
The dollar declined by 0.24% against a basket of reference currencies, while the euro gained 0.21% to 1.0896 dollars, and the pound sterling 0.12% to 1.2633 dollars.
In Asia, the yen strengthened by 0.81% to 141.72 yen per dollar, while the Australian dollar gained 0.78% to 0.671 dollars.
OIL
Oil is up slightly, supported by the Fed’s decision and a larger than expected drop in oil stocks in the United States.
Brent advanced 0.61% to $74.71 per barrel, with American light crude (West Texas Intermediate, WTI) gaining 0.5% to $69.82.
(Writing by Corentin Chappron, edited by Zhifan Liu and Kate Entringer)
Copyright © 2023 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.
