Stability in sight in Europe pending Fed decisions – 12/14/2022 at 08:11

by Claude Chendjou

PARIS (Reuters) – Major European stock markets were expected on a firmer note on Wednesday at the opening in a session that should again be supported by a more marked than expected slowdown in inflation in the United States but monetary policy announcements by The US Federal Reserve (Fed), scheduled for the evening, may encourage investors to be cautious.

According to the first indications available, the Dax in Frankfurt should bite at the opening by 0.01% and the EuroStoxx 50 index by 0.13%. London’s FTSE 100, on the other hand, is expected to be down slightly, by 0.01%

A sharper-than-expected drop in consumer price inflation (CPI) in the United States, to 7.1% year-on-year in November, comforted investors on Tuesday after the publication of better-than-expected price numbers on Friday in production.

Therefore, the market has revised the likelihood that the Fed will slow the pace of rate hikes in early 2023, before likely ending the monetary tightening cycle in March.

A statement from the US central bank is expected at 7:00 pm GMT, followed by a press conference half an hour later from its chairman, Jerome Powell, after two days of monetary policy meetings.

Meetings of the European Central Bank (ECB), Bank of England (BoE) and Swiss National Bank (SNB), are scheduled for Thursday.

For these four central banks, markets expect a limited increase of 50 basis points in their interest rates this month after an increase of 75 basis points.

In today’s statistics, investors will note monthly UK inflation figures and industrial production data in the Eurozone.

PRICES TO FOLLOW IN EUROPE:

ON WALL STREET

The New York Stock Exchange ended in the green on Tuesday as weaker-than-expected U.S. consumer price inflation bolstered the hypothesis that the Fed will be less aggressive in raising interest rates that it has been operating to counter the inflation.

The Dow Jones Industrial Average gained 0.30%, or 103.60 points, to 34,108.64 points.

The broader S&P-500 gained 29.09 points, or 0.73%, to 4,019.65 points.

The Nasdaq Composite advanced for its share by 113.08 points (1.01%) to 11,256.81 points.

Side values, Moderna jumped 19.63% after promising results of a study for an experimental vaccine from the laboratory against skin cancer. Merck, whose vaccine-related Keytruda, gained 1.78%.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended up 0.75% to 28,165.66 points and the broader Topix advanced 0.6% to 1,977.42 points.

In China, the Shanghai SSE Composite fell 0.12% but the CSI 300 gained 0.3%, in a volatile session marked by profit-taking.

The MSCI Asia-Pacific index, excluding Japan, gained 0.54%

CHANGES

In foreign exchange, the dollar fell 0.04% against a basket of benchmark currencies and hit a six-month session low in response to US inflation figures. Compared to the 20-year peak reached in September, the greenback has lost more than 9%.

The euro was mostly stable at 1.0629 dollars (-0.01%).

RATE

The yield on the ten-year US bond, which had lost 11 basis points on Tuesday, fell again by about a point to 3.49% in Asian trade. That in two years, the most sensitive to the evolution of interest rates, gives more than three points after receiving 17.4 the previous day.

In Europe, the ten-year German Bund yield ended Tuesday’s session at 1.90% after opening at 1.95%.

OIL

Oil prices were punished by a larger-than-expected increase in crude inventories in the United States last week. They rose by about 7.8 million barrels against the Reuters consensus forecast of 3.6 million, according to sources citing figures from the American Petroleum Institute.

Brent lost 0.5% to 80.28 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.44% to 75.06 dollars.

(Written by Claude Chendjou, edited by Bertrand Boucey)