Information from the Wall Street Journal at the end of the session allows Cac 40 to limit damage, Market News

The break was short-lived. After a few days in which, thanks to a major political “reset” in the United Kingdom, investors had more peace to focus on quarterly company publications, the Paris stock exchange fell again today, although the Cac 40 ended far from its lows for the day, which helped at the end of the session a small easing of rates that changed the situation after the article The Wall Street Journal. in Bedroom 40 closed down 0.85% at 6,035.39 points, while it was down more than 2% by around 4:00 p.m. During the week, the Paris index rose by 1.7%. On Tuesday, the Cac 40 rose to nearly 6,140 points, the highest level since September 15, before the US central bank raised its key rates for the third time by 75 basis points (to bring them to a range of 3-3.25%). in a row and that the United Kingdom is not reviving the specter of a systemic crisis à la Lehman Brothers.

The sacking of the UK’s former Chancellor of the Exchequer, his replacement by Jeremy Hunt, who very quickly buried his predecessor’s unfunded tax measures (the same ones that lit the powder keg and almost blew up the planet’s finances), then, yesterday, the resignation of Liz Truss as Prime Minister the minister suggests a return to a more orthodox economic and budgetary policy in this G7 country. The yield on 30-year UK government bonds (among those scarred by the recent chaos when pension funds were forced to sell their long-term bonds to meet margin calls) fell to nearly 3.8% at the close of the stock market yesterday. European markets are down almost 5% at the end of last week and over 5% at the end of September after the Trusonomics announcement. Now they make up to 4%. In the main bond markets, government bond rates are trending higher again. France’s 10-year rates, at more than 3%, are the highest since 2012. In the United States, sovereign rates with the same maturity of more than 4.3% are back to the levels they were in 2008, during the subprime crisis before the collapse of Lehman Brothers.

Rates above 5% in the United States in the spring?

Again, inflation and interest rates polarize investors’ attention as the next eight sessions look high risk. Why? The major centers are due to give their verdict on their monetary policy in the next two weeks: next Thursday for the European Central Bank (ECB), Friday for the Bank of Japan (BoJ), Wednesday 2 November for the US Federal Reserve (FED) and Thursday 3 November for the Bank of England (BoE). Apart from the special case of the Bank of Japan, which is still holding off on raising its rates despite inflation also starting to run rampant locally (which is an exception for a country that has survived deflation), all other major central banks will raise key rates again. How much is still unknown. The latest inflation figures, whether in the Eurozone (9.9% year-on-year in September), the United Kingdom (again above 10%) and the United States (at 8.2%, higher than expected, according to the Atlanta Fed, which distinguishing between hard prices, which are moving slowly, and flexible prices, which are showing their biggest increase since June 1982) – leave little doubt that central banks will have to hit hard again. Investors are betting on another rate hike of 75 basis points by the ECB, the Fed and the Bank of England.

Yesterday, US central bankers spoke for the last time before the “blackout”, the period of silence until the next meeting of the Federal Reserve. And the exchange did not like what they said. Governor Lisa Cook, known to be part of the dovish camp, echoed Fed boss Jerome Powell’s message that the central bank “will continue his efforts until the job is done”and what is it “It will likely require continued rate hikes, followed by tight policy for some time. » For his part, Philadelphia Fed President Patrick Harker said he expects rates to stay that way “much better” to 4% by the end of the year, bolstering investor expectations that rates will reach 4.5-4.75% in December (compared to a low of 4.25-4.5% two weeks ago). Since yesterday evening, the debt market has been in turmoil again. Fed futures have crossed a new pain threshold, predicting that key rates in the United States will exceed 5% next spring.

These expectations eased somewhat this afternoon according to information from The Wall Street Journal reports that some US central bankers are worried about the economic consequences of excessive rate hikes. The Fed could consider raising its rates by as little as 50 basis points in December, but it would want to avoid another boom in the markets like in July, when investors who had just been waiting for that moment realized that the end of rate hikes was imminent and that the Fed was even ready focus on the first months of 2023.

Leave a Comment

Your email address will not be published. Required fields are marked *