Stocks rise and rates fall after US inflation – 10/08/2022 at 18:44


It’s all over the European stock markets

by Laetitia Volga

PARIS (Reuters) – European shares closed higher on Wednesday, with Wall Street rising as weaker-than-expected US inflation data eased fears of a massive Federal Reserve rate hike at its next meeting in September.

In Paris, the CAC 40 index rose 0.52% to 6523.44 points. Britain’s FTSE rose 0.25% and Germany’s DAX rose 1.23%.

The EuroStoxx 50 Index is up 0.91%, the FTSEurofirst 300 Index is up 0.68%, and the Stoxx 600 Index is up 0.89%.

At the close in Europe, Wall Street was in a sharp uptrend: the Dow was up 1.54%, the S&P 500 was up 1.94%, and the Nasdaq Composite was up 2.58%.

Consumer Prices (CPI) in the US stagnated in July and showed an 8.5% YoY increase, while the Reuters consensus forecast a 0.2% MoM and 8.7% YoY increase.

Federal funds rate futures now reflect the possibility that the US central bank will raise the federal funds rate by 50 basis points in September (between 2.75% and 3%), not more than 75 basis points as projected before the inflation figures were released. .

However, the Fed’s battle against accelerating inflation is far from over, and institution officials may be reluctant to slow the pace and extent of monetary tightening, some strategists point out.

“Overall, prices are still very high,” wrote Rubella Farouk of High Frequency Economics. “Alongside job and wage growth, inflation data supports the case for another rate hike in September.”

Chicago Fed President Charles Evans emphasized that inflation remains at an “unacceptable” level and that the Fed will need to continue its monetary tightening to bring the “fed funds” rate into the likely range. 3.25% -3.5% at the end of the year.

Value

In the stock market, defensive sectors were among the biggest decliners, with healthcare down 0.88% and utilities down 0.51%.

In corporate news, retailer Ahold Delhaize surged 7.57% in Amsterdam after raising its annual earnings per share forecast once again.

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US inflation data translated into lower bond yields as expectations of a sharp Fed rate hike in September waned.

The 10-year US Treasury yield hit a low of 2.674% before returning around 2.76%, down three basis points.

The European market followed suit: Germany’s 10-year yield fell as much as 0.837%, its lowest since August 5, before paring its losses.

According to data from Refinitiv, money markets are still seeing a 100% chance of a 50 basis point ECB rate hike in September, but investors now see a 106 basis point rate hike by December, compared to 113 basis points. Basis before the publication of inflation in the United States.

“There is enough difference in inflationary pressures between the US and the eurozone that the ECB’s short-term outlook does not change much,” said Peter McCallum, strategist at Mizuho.

the changes

The dollar fell 1.34% against a basket of benchmark currencies (+0.02%) on the back of US inflation figures, allowing the euro to reach a five-week high against the greenback at 1.0331.

The British pound fell in the session to its lowest level since July 26 against the euro after a report from Bloomberg that the British government plans to cut power to industry and households in January in the event of a very cold winter and a shortage of gas. .

oil

Oil prices are stabilizing after falling due to the resumption of crude deliveries on the Druzhba pipeline connecting Russia with many Central European countries and the announcement by the US Energy Information Agency of a larger-than-expected increase in crude stocks in the United States last week.

Brent is unchanged at $96.3 a barrel, while US Light crude (WTI, West Texas Intermediate) is trading at $90.67.

(Writing by Letitia Volga, Editing by Mathieu Brotthard)

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