by Augustin Turpin

(Reuters) – European stock markets ended slightly higher on Wednesday and Wall Street advanced at the same time, driven by the prospects of a reduction in interest rates by the American Federal Reserve.

In Paris, the CAC 40 ended up 0.04% at 7,571.82 points. The British Footsie gained 0.39% and the German Dax 0.2%.

The EuroStoxx 50 index advanced by 0.17%, the FTSEurofirst 300 by 0.22% and the Stoxx 600 by 0.27%.

The markets are counting on an end to the Fed’s rate hike, an optimism justified by the latest indicators which showed a decline in inflation and a slowdown in activity in the United States compatible with a landing scenario in candy.

According to the CME Group’s FedWatch barometer, financial markets are counting with an 80% probability of a Fed rate cut in March.

Tim Murray, an analyst with the T. Rowe Price asset management group, notes that much of the year has been marked by fears that rate hikes could push the economy into recession.

“Fortunately, that didn’t happen, and a dovish Fed means the likelihood of a recession in 2024 has decreased significantly,” he said.

According to analysts, the main risk for the markets lies in a slower than expected drop in rates.

“If global stock markets have one Achilles heel heading into January 2024, it is the idea that the Fed will methodically and steadily cut interest rates throughout the year,” said Nicholas Colas, co-founder of DataTrek Research.

VALUES

Maersk’s announcement of its intention to transit several dozen container ships through the Suez Canal and the Red Sea, despite the risk of attacks off the coast of Yemen, led to a drop of 4.65% in its stock , as well as its competitors Hapag-Lloyd (-8.20%), the oil group Frontline (-5.70%) and the car transporter Hoegh Autoliners (-2.71%).

A WALL STREET

After opening on a hesitant note, Wall Street posted a slight rise despite the absence of a catalyst, as large-cap technology stocks carried the Nasdaq into positive territory.

Interest rate sensitive large caps such as Tesla, Amazon.com and Meta Platforms have helped the Nasdaq move into positive territory more decisively.

CHANGES

The dollar fell 0.54%, to its lowest level in five months against a basket of reference currencies, pulled down by expectations of a reduction in interest rates from the Fed.

The euro gained 0.64% to 1.1113 dollars.

RATE

The yield on the ten-year German Bund fell 6.9 points to 1.899%, to its lowest level in a year, as investors returned from vacation and bet on a sharp cut in interest rates in 2024.

In the United States, the American bond markets are falling, with the ten-year losing 6.6 basis points to 3.8185%.

OIL

Oil prices are falling as investors monitor developments in the Red Sea, where carriers are resuming operations despite the risk of attack off Yemen.

Brent dropped 1.3% to $80.02 per barrel, with American light crude (West Texas Intermediate, WTI) losing 1.42% to $74.5.

(Writing by Augustin Turpin, edited by Kate Entringer)

Copyright © 2023 Thomson Reuters