Europe ends in the red, rates and recession risk weigh on
By Claude Chenjou
PARIS (Reuters) – European stock markets fell on Friday and Wall Street fell in the morning in New York on fears over interest rates and economic developments after this week’s announcements by major central banks and the publication of mixed European PMI readings today. United States of America.
In Paris, the CAC 40 index decreased by 1.08% and ended at 6,452.63 points. The British Footsie lost 1.27% and the German Dax lost 0.67%.
EuroStoxx 50 index fell by 0.83%, FTSEurofirst 300 by 1.06% and Stoxx 600 by 1.2%.
During the entire week, CAC 40 lost 3.37% and Stoxx 600 lost 3.04%.
Investors still haven’t digested US Federal Reserve (FED) Chairman Jerome Powell’s words on Wednesday suggesting that interest rates will rise to 5.1% next year, not seen since 2007.
John Williams, chairman of the Fed’s New York branch and vice chairman in charge of setting interest rates at the Federal Open Market Committee (FOMC), warned on Friday that the US central bank could even exceed that limit. will raise interest rates to 4.25%-4.5% this week next year.
In the euro zone, Olli Rehn, one of the members of the Governing Council of the European Central Bank (ECB), announced on Friday that the Frankfurt institution, which raised the cost of borrowing by half a point to 2% on Thursday, raised its rates by a further 50 basis points in February and March. Eurozone inflation was revised up to 10.1% in November over the year.
Francois Villeroy de Galhau, a member of the Central Bank’s Board of Directors, in his turn considered that the game against inflation in the euro zone is not over.
The Bank of England (BoE) and the Swiss National Bank (SNB) have not ruled out a prolonged tightening of monetary policy against the backdrop of still high inflation.
In addition to concerns about interest rates and inflation, there are mixed economic indicators in the euro zone and the UK, with the composite PMI falling below the 50 threshold that separates contraction and expansion again this month.
U.S. economic activity weakened further in December, with new orders falling to the lowest level in just over two and a half years.
VALUES IN EUROPE
In Europe, apart from banks (+0.8%), all major sections of the Stoxx 600 ended in the red, with the biggest decliner in real estate (-4.79%), which suffered from the prospect of continued monetary policy by the central bank. banks.
Unibail-Rodamco-Westfield advanced 4.74% and BNP Paribas advanced 1.68%.
In business news, Tele2 weighed on the telecom sector (-2.46%), down 6.47% after Citigroup cut its price target on the Swedish operator.
British publisher Games Workshop rose 16.16% after reaching an in-principle deal with Amazon to adapt wargame “Warhammer 40,000” to film and television.
ON WALL STREET
At the close in Europe on Thursday, the Dow Jones Industrial Average fell 1.38%, posting its biggest drop in three months. The Standard & Poor’s 500 and Nasdaq, which posted their biggest single-session interest rate declines in six weeks on Thursday, fell 1.54% and 1.33%, respectively.
The growth of Meta Platforms (+3.77%) and Adobe (+3.22%) allowed the Nasdaq to limit its losses. The social network benefited from an increase in JP Morgan’s recommendations, while the publisher of Photoshop announced a better-than-expected profit forecast for the first quarter.
The dollar edged up 0.13% against a basket of benchmark currencies after Thursday’s gains as traders continued to adjust their positions to higher interest rates and longer horizons.
The euro is trading at $1.0609, down 0.16%.
Bond yields were supported by an upward revision of expectations for rising interest rates following recent statements from several ECB and Fed officials.
The yield on the ten-year German Bund, the benchmark for the entire eurozone, rose 8.2 basis points to 2.16%, while the two-year yield rose 7.1 basis points to 2.44%.
In the United States, the ten-year Treasury yield rose four basis points to 3.49%, and the two-year yield nearly two basis points to 4.22%.
The oil market is affected by interest rate concerns on Friday, but should post weekly gains throughout the week.
Brent fell 2.67% to $79.04 a barrel, US light crude oil (West Texas Intermediate, WTI) fell 2.3% to $74.36.
(Writing by Claude Chendjou, Editing by Kate Entringer)