Europe ends in red once more, Fed nervousness ignites – 09/20/2022 at 22:47
Chart of the DAX German inventory value index on the Frankfurt Stock Exchange
By Claude Chendjou
PARIS (Reuters) – European shares ended decrease on Tuesday as fairness market nervousness dominated the beginning of the U.S. Federal Reserve’s (Fed) two-day financial coverage assembly and Wall Street additionally traded in the red mid-session, regardless of fears of a slowdown that may finish with a pointy rate of interest hike on Wednesday. is anticipated
In Paris, the CAC 40 ended down 1.35% at 5,979.47 factors. German DAX fell 1.03%. Britain’s footy fell 0.61% after a 3-day shutdown linked to Queen Elizabeth’s funeral.
The EuroStoxx 50 index fell 0.93%, the FTSEurofirst 300 1.02% and the Stoxx 600 1.09%.
Awaiting a choice from the Fed’s Federal Open Market Committee (FOMC) did little to encourage threat-taking in Europe, the place the Stoxx 600 volatility index ended up 3.7% at 27.15 factors, whereas its US counterpart rose 3.14% to 26.57, a document final week. Closer to the 2 month most.
“Traders are very cautious forward of tomorrow’s Fed announcement,” mentioned Peter Cardillo, chief economist at Spartan Capital Securities.
With one other Fed price hike of 75 foundation factors not debated, traders will focus, in keeping with Peter Cardillo, on whether or not a hike of this magnitude will now be the norm for future central financial institution conferences. american
Sweden’s central financial institution shocked on Tuesday by saying a 100-level hike in its key rate of interest to 1.75% and warning that it plans to tighten financial coverage to deal with inflation.
Monetary coverage choices by the Bank of England (BoE), Bank of Japan (BoJ) and Swiss National Bank (SNB) can be introduced on Thursday. Switzerland additionally sharply reduce its progress forecast on Tuesday, to 2% for this 12 months and 1.1% for 2023.
“A extra restrictive financial coverage in the world will improve the risk to dangerous belongings,” ING Bank warned on Tuesday.
In Europe, other than tourism and leisure (+0.2%), all different sectors ended in the red, together with the banking sector (-0.08%) which erased earlier beneficial properties linked to expectations of rate of interest hikes.
Real property (-4.1%), which ought to undergo on account of rising borrowing prices, confirmed the largest sectoral decline.
Unibail-Rodamco and Klépierre misplaced 4.29% and 4.39% respectively.
In phrases of enterprise outcomes, British DIY retailer group Kingfisher (-3.92%) was punished by a virtually 30% drop in its half-12 months revenue, whereas German Henkel, up 1.22%, benefited from its natural progress forecast for this 12 months.
Fortum, Uniper’s largest shareholder (+3.83%), jumped 9.5% after saying plans to nationalize the German power provider, which might see German public authorities purchase the Finnish group’s stake.
On Wall Street
At the shut in Europe, the Dow Jones was down 1%, the S&P 500 was down 0.96% and the Nasdaq was down 0.53%. All main sectors of the S&P-500 are in the red.
Technology teams are experiencing blended fortunes with bargains in Apple (+1.91%) and Tesla (+1.35%), whereas Alphabet (-0.90%) and Amazon (-0.50%) are uncared for.
PayPal fell 2.55% after a advice downgrade.
Ford fell 9.74% because the automaker mentioned Monday that its provide prices would rise by about $1 billion greater than anticipated in the third quarter. Its competitor General Motors gained 4.63%.
The greenback, up 0.28% in opposition to different main currencies, hit its 20-12 months excessive recorded on 7 September. The dollar is benefiting from each its standing as a secure-haven asset and the prospect of sharp price hikes, with a 100 foundation level likelihood of a 19% improve in credit score prices on Wednesday, in keeping with the FedWatch Barometer.
The euro fell under parity with the dollar at $0.9989 (-0.33%).
Bond yields in Europe ended sharply, significantly pushed by producer value figures in Germany, which recorded unprecedented progress in a 12 months and a month in August, up 45.8% and seven.9% respectively. This paves the best way for additional acceleration of price hikes in the euro space.
The ten-12 months German Bund yield closed at 1.94% (+15 factors), the best degree since January 2014; The 5-12 months one additionally rose 15 factors to 1.84% and the 2-12 months one, essentially the most delicate to price adjustments, jumped greater than 12 factors to finish at 1.72%.
According to expectations of the evolution of credit score prices in the euro space, the interbank price ought to attain 2.7% in August 2023.
In the US, the yield on ten-12 months Treasuries rose 9 factors to three.57% and the 2-12 months rose nearly three factors to three.97%.
Oil costs are penalized by greenback power which might have an effect on demand. Signs of tight provide are limiting the extent of the decline, nevertheless, as an OPEC+ doc confirmed the group’s August output fell wanting a deliberate goal of three.583 million barrels per day (bpd).
Brent fell 1.82% to $90.33 a barrel and US mild crude (West Texas Intermediate, WTI) fell 1.9% to $84.1.
(Written by Claude Chendjou, edited by Sophie Luet)