A recession is observed in Europe before the new decisions of the central banks

By Claude Chenjou

PARIS (Reuters) – Major European stock markets are expected to open lower on Thursday, with investors remaining cautious ahead of monetary policy announcements in the euro zone and the U.K. and after statements by the president. The Federal Reserve (FED) has estimated interest rate cuts ahead of schedule.

According to the first indicators available, the Dax in Frankfurt should lose 0.41%, the FTSE 100 in London should lose 0.14% and the EuroStoxx 50 index should lose 0.48% at the opening.

On Wednesday, the Fed announced a half-point increase in the key interest rate and shared new economic forecasts that call for an additional rate hike of at least 75 basis points in 2023 and very limited growth in the currency.The American economy.

Fed Chairman Jerome Powell’s comments at the conference after the announcements were not only restrictive, but also led to further inversion of the yield curve, stoking fears of a recession.

“This is a very ‘hawkish’ message from the Fed: Significantly higher terminal rate compared to September, but real upside risk,” TD Securities analysts wrote in a note, referring to the Fed’s forecasts. A peak above 5%, a level not seen since the severe economic recession of 2007.

The European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to raise interest rates by 50 basis points on Thursday.

In terms of economic statistics, investors will note the monthly data on US retail sales at 12:30 p.m. The Reuters consensus calls for a 0.1% monthly contraction after a 1.3% increase in October.

Retail sales in China fell 5.9% in November, the sharpest contraction since May, while industrial production fell 2.2% year-on-year and real estate investment fell 19.9% ​​to a more than 20-year low.

VALUES IN EUROPE:

Hennes & Mauritz (H&M) is due to publish fourth quarter sales.

ON WALL STREET

The New York Stock Exchange fell on Wednesday after a volatile session after the Fed decided to raise interest rates by 50 basis points as expected, but said it expected higher rates for a longer period.

The Dow Jones index decreased by 0.42% or 142.29 points to 33,966.35 points.

The broader S&P-500 lost 24.33 points, or 0.61%, to 3,995.32.

Nasdaq Composite decreased by 85.93 points (0.76%) to 11,170.89 points.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index fell 0.37% to 28,051.7 points, while the broader Topix fell 0.18% to 1,973.9 points, as worries about Fed forecasts eased.

In China, the Shanghai SSE Composite fell 0.14%, and the CSI 300 fell 0.03%.

RATE

In Asian trade, the yield of ten-year US bonds fell to 3.49%, the yield of two-year bonds fell to 4.24%, and the spread between these two maturities fell to -75.2 points, an inversion indicates a short-term recession . The horizon.

In Europe, the ten-year German Bund yield ended higher at 1.93% in Europe, supported by Reuters reports that the ECB forecast on Thursday that inflation would still be above 2% in 2025.

CHANGES

The prospect of a long-term increase in US interest rates supports the dollar, which rose 0.17% against a basket of benchmark currencies.

Before the CBA and BoE decisions, the euro was at $1.0655 (-0.25%), and the pound sterling fell 0.22% to $1.2394.

OIL

Oil prices are trending lower in Asian trade on dollar strength, while the prospect of continued monetary tightening by central banks is fueling fears about demand.

Brent fell by 0.71% to $82.11 a barrel, US light oil (West Texas Intermediate, WTI) fell by 0.88% to $76.60.

(Written by Claude Chendjou, edited by Matthieu Protard)