(News Bulletin 247) – The Parisian index ended higher this Thursday, helped by the outcome of the monetary policy meeting of the Federal Reserve (Fed). But the firmness of the President of the European Central Bank led the CAC 40 to reduce its gains.

If Jerome Powell, the president of the American Federal Reserve (Fed), has taken on the role of Santa Claus, Christine Lagarde, his counterpart at the head of the European Central Bank (ECB), has instead taken on the costume of ” Grinch”, this character who ruins the end of year party.

This did not prevent the CAC 40 from ending up 0.59% at 7,575.85 points this Thursday. But the Parisian index failed at the gates of its closing record (7,577 points) and its progression was approximately half as strong as at mid-session. However, he set a new session record at 7,653.99 points.

The ECB meeting weighed on the trend somewhat this afternoon. If the central bank kept its key rates unchanged, Christine Lagarde gave a firm speech on the evolution of rates, indicating that the members of the ECB had not discussed rate cuts (unlike Powell who explained that this subject had been discussed by the Fed).

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The ECB does not intend to let down its guard

Christine Lagarde estimated that the ECB should not let down “its guard” (those were her words). She even compared the changing rates to the liquid, solid and gaseous states of a chemical element. This was to make the market understand that between increases and decreases in rates, there was an intermediate phase, that of maintaining these rates at a stationary level. It is therefore not a question of “going from the solid to gaseous state” while forgetting the liquid state, she explained.

“I thought that Christine Lagarde would do what she did, which is to calm market expectations which seem extremely aggressive to me, but she did it more firmly than I expected,” explained Gilles Moec, chief economist of the Axa group in News Bulletin 247. The economist believes that the central banker adopted a tone perhaps even more restrictive than she anticipated because of “what she saw” Wednesday evening with Jerome Powell’s press conference. “She (perhaps) saw how the market can react to the slightest hint of the beginning of the announcement of a rate cut and, therefore, she sought to be as unambiguous as possible,” he said. he elaborated.

On a more technical level, the ECB announced that, on its debt repurchase program launched during the pandemic (PEPP), it intended to continue the full reinvestment of repayments in respect of the principal of securities maturing in the first half of 2024. Then it intends to reduce the PEPP portfolio by 7.5 billion euros per month on average in the second half of 2024.

Powell delights the market

A more restrictive tone, therefore, in comparison with the very well-received Fed announcements. The American central bank, as investors expected, kept its key rates unchanged and its president, Jerome Powell, refused to declare victory in the fight against inflation during his press conference. He also did not rule out the possibility of a further increase in key rates, if economic data justified it, according to Bloomberg.

The central banker nevertheless acknowledged that Fed members had discussed rate cuts.

Above all, the market was delighted with the “dot plots”, or the economic and monetary projections of the members of the Fed. According to this document, the central bank members’ median projection for 2024 key rates stands at 4.6%, which implies a total of 75 basis points (0.75%) of rate cuts per year. next (or three cuts of 25 basis points).

“Higher key rates for longer, that’s what the Fed’s position has been in recent months. This is no longer the case. Jerome Powell and his colleagues have started to discuss the conditions for lowering interest rates. “The question is therefore no longer whether monetary policy will be relaxed but when and at what speed”, explains Bruno Cavalier of Oddo BHF.

The Bank of England also maintained the status quo on its rates on Thursday, while warning that its rates would remain high for “a prolonged period”, in the face of still high inflation in the United Kingdom.

On the value side, cyclical and/or indebted groups (like Forvia which took 9.6% or Clariane which gained 10.6%) were at the party.

Air France-KLM rose 9% after revealing its ambitions for 2028 as part of an investors day. Vivendi took 10% while the group studies a potential split into three listed companies.

On other markets, the euro jumped 1.1% against the dollar to 1.0998 dollars, benefiting from Christine Lagarde’s firm speech. Oil is progressing significantly. The February contract on North Sea Brent rose 3.7% to $76.92 per barrel, while the January contract on WTI listed in New York rose 3.7% to $72.06 per barrel. barrel.