The European stock markets maintained their downward trend at the opening on Thursday, digesting with difficulty the messages deemed strict by the Federal Reserve the day before, while awaiting the last three major monetary meetings of this year-end. These declines also follow Wall Street, which ended at half-mast on Wednesday.
At 9:00 am on Thursday, Paris was down 0.83%, Frankfurt was down 0.75% and London was down 0.60% in early trading, pending meetings of the European Central Bank, the Bank of England and the Swiss National Bank.
In Asia, the Tokyo Stock Exchange fell slightly on Thursday morning, after the announcements of the day before by the Fed. The flagship Nikkei index lost 0.37 percent to 28,051.70 points at the close and the broader Topix index gave up 0.18 percent to 1,973.90 points. Losses were more severe on the Hong Kong Stock Exchange (-1.43%), demoralized by the Fed’s announcement but also by the drop in retail sales in China in November, which was more severe than expected (-5.9% over one year).
The New York Stock Exchange, Wall Street, ended at half-mast yesterday after the Fed, the U.S. central bank, raised its rates again. The indices that were evolving positively until the end of the monetary meeting, plunged into the red. The Dow Jones fell 0.42%, the Nasdaq 0.76% and the S&P 500 0.61%. The Fed on Wednesday raised its main policy rate by half a percentage point, after having previously increased it by three-quarters of a point, to control the highest inflation observed in the United States in 40 years.
A little less optimistic about the evolution of U.S. inflation next year and much more pessimistic than before, on the growth of national GDP, the Fed intends to continue its monetary tightening. “The markets are overestimating the Fed’s ability to pivot”, i.e. to change direction in its monetary policy, warns Bénédicte Kukla. The senior investment analyst at Indosuez Wealth Management believes that the labor market and services inflation remain too tight.
Finally, Fed boss Jerome Powell hinted that rate hikes would continue in 2023. The monetary committee now sees the final level of overnight rates above 5%.
The FED disappoints
Following the Fed’s announcements, European stock markets also closed in the red yesterday: Paris lost 0.21%, Frankfurt and Milan gave up 0.26% and London fell 0.09%.“The forecasts are more severe than expected,”said Ian Shepherdson of Pantheon Macroeconomics.
The CAC 40 index gave up 14.19 points to 6,730.79 points while the day before, the Paris stock market had rebounded sharply (+ 1.42%) after a negative start to the week. On Thursday, it will be the turn of the Bank of England and the European Central Bank to pronounce.
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