Cautious rise in Europe on the eve of the Fed meeting

from Leticia Volga

PARIS (Reuters) – European stock markets closed on Tuesday, but erased only part of the losses of the previous session due to fears about the economic situation ahead of the decisions of the US Federal Reserve on monetary policy.

In Paris, the CAC 40 rose 0.79% to 6,476.18 points. The British Footsie rose by 0.22% and the German Dax – by 0.72%.

The EuroStoxx 50 index rose 0.77%, the FTSEurofirst 300 0.34% and the Stoxx 600 0.53%.

The progression of the indices was facilitated by the Wall Street index, the main US indices rose by 0.4% to 0.9%.

If the announcement of a Fed rate increase of 50 basis points on Wednesday is no longer discussed among market players, they wonder what the agency can say or not about the future trajectory of its rates and the reduction of its balance.

Investors fear that an overly aggressive tightening of monetary policy will burden the global economy, already weakened by the war in Ukraine and the constraints of the COVID-19 crisis in China.

VALUES IN EUROPE

The most cyclical sectors, such as the automotive industry (+ 2.24%), banks (+ 2.19%) and energy (+ 4.12%), recorded the largest growth.

BNP Paribas grew by 5.15% after quarterly net income exceeded expectations as its market power more than offset the impact of the war in Ukraine.

BP grew 5.80% after announcing the highest net profit since 2008 and an increase in the quarterly share repurchase program.

Cosmetic group L’Oréal lost 1.94% after its US rival Estée Lauder (-5%) cut its planned profit due to the health situation in China and the war in Ukraine.

Covestro fell 4.85% after a year-on-year decline in target profits, citing quarantine in Shanghai and rising energy and raw material prices.

RATE

In the bond market, the yield on ten-year US Treasury bills on Monday exceeded 3% for the first time since December 2018, and it crossed this threshold again in the morning, before the Fed announced on Wednesday.

Now it has fallen by seven basis points to 2.9263%.

In Europe, the ten-year German exchange rate rose briefly to more than 1% for the first time since June 2015. He ended the session almost stably at around 0.95% after a peak of 1.016%.

After that, the ten-year French exchange rate rose in the morning to a maximum since August 2014 at 1.544%.

CHANGES

In the foreign exchange market, the dollar fell 0.36% against a basket of reference currencies after reaching a nearly 20-year peak last week due to expectations of a sharp rise in the United States. The euro rose to $ 1.0533, but traders expect the single currency to remain under pressure in the coming days due to fears of inflation, growth, the war in Ukraine and a less restrictive ECB bias against the Fed.

The Australian dollar (+ 0.74%) benefited from the announcement by the RBA, Australia’s central bank, of its first rate hike in more than a decade.

INDICATOR OF THE DAY

Among the indicators released on Tuesday, producer prices in the eurozone rose more than expected by 5.3% year on year in March.

OIL

Concerns about the impact of health care restrictions in China on demand affect the oil market: Brent fell 1.27% to $ 106.21 a barrel, and US light oil (West Texas Intermediate, WTI) by 1.45% to $ 103.64.

TO BE CONTINUED :

(Inscription: Leticia Volga, edited by Tangi Saloun)