Post-Fed, pre-ECB and BoE bullishness seen in Europe
By Claude Chenjou
PARIS (Reuters) – Major European stock markets are expected to be higher at the open on Thursday after Wall Street closed benefiting from statements seen as agreeable by the chairman of the U.S. Federal Reserve (FED). Taking risks ahead of announcements from the European Central Bank (ECB) and the Bank of England (BoE).
Index futures are offering gains of 0.66% for the CAC 40 in Paris, 0.65% for the Dax in Frankfurt, 0.47% for the FTSE 100 in London and 0.72% for the EuroStoxx 50.
As expected on Tuesday, the Fed decided to raise its target federal funds rate by a quarter point to 4.50%-4.75%, while hinting that further increases in the cost of credit are expected. Its chairman, Jerome Powell, said that it is possible to return to the 2% inflation level without causing a noticeable slowdown in the economy, and added that only two or three percentage points could be removed from the level the US central bank considers. is quite restrictive.
He then noted that the process of “disinflation” had begun, which had sent US stock indexes sharply higher at the close.
In Europe, the ECB monetary policy statement is expected at 13:15 GMT and the BoE at 12:00 GMT. According to a widely shared consensus among experts, the two central banks should favor limited increases in interest rates of 50 basis points to 2.5% and 4% respectively, with eurozone inflation slowing further to 8.5% in January. However, uncertainties remain regarding the future trajectory of interest rates. Markets estimate peak borrowing costs in the eurozone at 3.5% and in the UK at 4.5%, implying further tightening with the risk of a serious economic downturn in the region.
As in previous sessions, the new series of company results should revive trading, especially in the technology division with Meta Platforms, which posted a 19% increase in after-hours trading after announcing tighter controls on its costs and a forecast increase in its turnover for the current quarter. Apple, Alphabet, Amazon and Qualcomm are due to release their quarterly accounts after the close.
In the pharmaceuticals sector, Merck & Co, Bristol Myers Squibb and Eli Lilly are expected ahead of the session opening in New York. In Europe, Dassault Systèmes, Publicis, Infineon, Shell and even Deutsche Bank are on the agenda.
ON WALL STREET
The New York Stock Exchange ended higher on Wednesday as the Fed adopted a less aggressive monetary policy to fight inflation.
The Dow Jones Industrial Average rose 0.02 percent, or 6.92 points, to 34,092.96.
The broader S&P-500 rose 42.61 points, or 1.05%, to 4,119.21.
The Nasdaq Composite rose 231.77 points (+ 2.00%) to 11,816.32.
On the Tokyo Stock Exchange, the Nikkei index was up 0.2% at 27,402.05, led by technology shares, while the broader Topix was down 0.36% at 1,965.17.
In China, the Shanghai SSE Composite gained 0.02%, while the CSI 300 fell 0.35% in a volatile session.
The yield on ten-year U.S. Treasuries was virtually flat at 3.41% on Thursday after falling more than 12 basis points a day earlier in response to the Fed’s remarks.
Its German equivalent for the same period fell five points to 2.24% on Thursday.
In the currency market, the dollar fell 0.19% against a basket of currencies after hitting a new nine-month low of 100.8 points on Wednesday.
The euro took the opportunity to climb to a ten-month high near $1.0995 ahead of the ECB announcements.
The British pound, meanwhile, is trading at $1.2376 pending BoE decisions.
Oil prices are rising due to the weakening of the dollar and the decision of OPEC+ not to change the production quotas.
Brent rose 0.41% to $83.18 a barrel, US light crude oil (West Texas Intermediate, WTI) rose 0.48% to $76.78.
(Written by Claude Chendjou)