by Claude Chendjou

PARIS (Reuters) – Major European stock markets are expected to trade cautiously on Wednesday ahead of announcements by the U.S. Federal Reserve and the publication of euro zone inflation indicators.

According to the first available indications, the Parisian CAC 40 should lose 0.05% at the opening. The Dax in Frankfurt could fall by 0.09%, while the FTSE 100 in London should drop 0.22%. The EuroStoxx 50 index is expected to fall by 0.04% and the Stoxx 600 by 0.10%.

Barring a huge surprise, the Fed will begin its first rate cut this Wednesday since the monetary tightening that began in March 2022, but the main unknown is the extent of this cut, with the market split between a reduction of 25 or 50 basis points.

Investors are also concerned that if the Fed opts for an aggressive reduction in the cost of credit in the United States, it could be a sign of a likely recession to come. The market is counting on a total rate cut in the United States of 120 points by the end of the year.

In Europe, where the European Central Bank (ECB) decided last week to reduce its key rates, the final inflation figures for the currency bloc will be released at 09:00 GMT.

Data released in Britain on Wednesday showed inflation was unchanged in August at 2.2% year-on-year, as the Bank of England (BoE) is due to make its monetary policy decision on Thursday. Norway’s central bank also meets on Thursday.

A WALL STREET

The New York Stock Exchange closed little changed on Tuesday, despite gains early in the session following the publication of reassuring data on the strength of the American economy.

The S&P 500 ended up a small 0.03% at 5,634.58 points, after setting a session record of 5,670.81 points, as investors welcomed the unexpected increase (+0.1%) in retail sales and industrial production last month.

The index has thus erased the last traces of its plunge at the end of July caused by a surge in unemployment and fears of a recession due to restrictive rates.

The Dow Jones fell 15.90 points, or 0.04%, to 41,606.18 points and the Nasdaq Composite gained 35.93 points, or 0.20%, to 17,628.06.

On the stock front, Microsoft posted the biggest gain in the S&P (+0.88%) after approving a new share buyback program, while Intel (+2.68%) benefited from the company signing a deal with Amazon.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index rose 0.49% to 36,380.17 points) the day after a slide of more than 1% on the back of a strengthening yen. The broader Topix gained 0.38% to 2,565.37 points.

The MSCI index of Asia and Pacific stocks (excluding Japan) lost 0.27%.

In China, financial markets have reopened after a break since Friday linked to the celebrations of the Moon Festival. The Shanghai SSE Composite gained 0.50%, while the CSI 300 rose 0.46%, driven in particular by the financial sector (+1.05%) while the consumer sector (-1.69%) weighed.

CHANGES

The dollar fell 0.03% against a basket of benchmark currencies, with the greenback tracking the trajectory of US bond yields on the prospect of a Fed rate cut.

The yen rose 0.60% to 141.57 per dollar. The Japanese currency has risen more than 12% since July, as the Bank of Japan (BoJ) decided to raise its key rates at a time when the Fed is preparing to lower its own.

The euro gained 0.08% to $1.1122, while the pound gained 0.06% to 1.3168% after the UK inflation figures.

RATE

The yield on 10-year US Treasury bonds was unchanged at 3.6456%, after falling the previous day to 3.599%, its lowest level since May 2023.

The yield on the German Bund of the same maturity is also stagnating, at 2.144%, after a gain of 2.7 points the day before.

OIL

The oil market is down after two consecutive sessions of gains, with investors now awaiting the Fed’s decisions.

Brent fell by 0.54% to 73.3 dollars per barrel and American light crude (West Texas Intermediate, WTI) fell by 0.58% to 70.77 dollars.

(Written by Claude Chendjou, edited by Blandine Hénault)

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