Hesitation ahead in Europe after ECB and Powell – 09/09/2022 at 08:56

Hesitation ahead in Europe after ECB and Powell – 09/09/2022 at 08:56

Hesitation ahead in Europe after ECB and Powell – 09/09/2022 at 08:56



by Claude Chendjou

PARIS (Reuters) – Major European equity markets are expected to open on Friday after the European Central Bank (ECB) hiked rates the day before and US Federal Reserve chairman pledged to fight inflation .

According to the first indications available, the Parisian CAC 40 should fall by 0.01% at the opening and the Dax in Frankfurt by 0.06%. London’s FTSE 100, on the other hand, could gain 0.28%. The EuroStoxx 50 index is expected to decline by 0.03%.

The ECB decided on Thursday to raise the cost of credit by an unprecedented 75 basis points, suggesting that its monetary tightening would continue, thus giving priority to fighting inflation despite the risk of a recession in the euro zone this winter.

In the US, where a similar rate hike is expected on Sept. 21, Federal Reserve Chairman Jerome Powell said Thursday that the Fed will continue to act “forcefully” to counter inflation.

On the markets, the probability of a three-quarter point Fed rate hike is now 86% versus 77% the day before.

The prospect of an acceleration in the cost of credit in both the US and Europe did not scare equity markets Thursday, although some volatility remains.

“There is a lot of uncertainty and I think investors won’t decide until they see the light at the end of the tunnel,” said Grace Lee, Columbia Threadneedle Investments portfolio manager.

Analysts say the ECB and Powell’s announcements are not really a surprise and are already priced, leading investors to now turn to monthly US consumer price data and definitive statistical inflation in August in the euro zone, two new economic data to be released next week.

The ECB also reaffirmed that the future trajectory of its key rates would remain dependent on economic data.

Friday’s session could also be driven by the gas crisis as an EU energy council of ministers meets in Brussels as EU countries seek emergency solutions to rising energy bills.


The New York Stock Exchange closed higher on Thursday, thanks to support from banks and healthcare stocks.

The Dow Jones Industrial Average gained 0.61%, or 193.24 points, to 31,774.52 points.

The broader S & P-500 gained 26.31 points, or 0.66%, to 4,006.18 points.

The Nasdaq Composite advanced for its part by 70.23 points (0.60%) to 11,862.13 points.


On the Tokyo Stock Exchange, the Nikkei index closed 0.53% higher at 28,214.75 points and the broader Topix took 0.4% to 1,965.53 points.

In China, the Shanghai SSE Composite gains 0.75% and the CSI 300 1.34%.

In terms of economic indicators, consumer prices in China increased at a slower-than-expected pace in August (+ 2.5% yoy, after + 2.7% in July) due to the heat wave and the resurgence of the COVID-19 epidemic, according to official data released on Friday.


US bond yields are broadly stable on Friday after the sharp rise the day before: the two-year stands at 3.5045% and the 10-year at 3.3078%.

In Europe, the German 10-year, which took 14 basis points on Thursday, gained another 5.1 points to 1.767%, while the two-year advanced 9.5 points to 1.416% after a gain of more than twenty points from standby.

France’s 10-year OAT rate took 6.3 points to 2.32% after jumping ten points on Thursday.


At the exchange rate, the dollar lost nearly 0.6% against a basket of benchmark currencies, but remained close to its 24-year high against the yen. The Japanese currency is affected by the policy of the Bank of Japan considered accommodating while that of the Fed is considered restrictive.

The euro, which hit a nearly 20-year low earlier in the week, advanced 0.69% to $ 1.0063, well above parity with the greenback, benefiting from ECB announcements.


The oil market remains volatile, with investors torn between Russia’s threats to stop hydrocarbon deliveries and fears of falling demand.

Brent rose 0.34% to $ 89.45 a barrel and US light crude (West Texas Intermediate, WTI) by 0.19% to $ 83.70.

The two oil benchmarks, however, are expected to show a decline over the week as a whole.

(Written by Claude Chendjou, edited by Bertrand Boucey)

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