PARIS (Reuters) – European stock markets ended in the red on Friday after a member of the US Federal Reserve spoke of the scenario of a rate hike in the United States even faster than expected by the Fed, prompting a cut stocks and a sharp rise in the dollar.
Paris, the CAC 40 cd 1.46% 6,569.16 points. The British Footsie fell by 1.9% and the German Dax by 1.78%.
The EuroStoxx 50 index lost 1.8%, the FTSEurofirst 300 lost 1.66% and the Stoxx 600 lost 1.58%.
Over the week, the latter lost 1.2% and the CAC 40 0.5%, ending a series of four consecutive weeks of increase.
At the time of closing in Europe, Wall Street was also in the red: the Dow Jones lost 1.1%, the Standard & Poor’s 500 and the Nasdaq Composite around 0.9%.
The president of the Federal Reserve of Saint-Louis, James Bullard, said he planned a first rate hike next year to contain higher-than-expected inflation and which he said will prove to be more sustainable.
By expressing his more ‘hawkish’ stance than that of the majority of Fed members, James Bullard cast a chill on the equity markets, which were barely recovering from the US central bank’s announcements on Wednesday.
The Fed had already surprised the markets by announcing that it was counting on a first increase in interest rates as of 2023, and no longer in 2024, and that it had started the debate on the coming reduction of its purchases of bonds in the markets.
“If Bullard is not a voting member of the Fed’s monetary policy committee this year, he will be next year (…) which will further muddy the waters for the markets as to when the Fed will act. in response to inflationary concerns, “said Michael Hewson at CMC Markets.
The words of James Bullard “confirm the evolution of the Fed, which is now more concerned with rising inflationary pressures,” commented on Citigroup analysts for their part.
All European sectors ended lower with the biggest drop for banks, whose Stoxx index fell 2.95%, just ahead of energy (-2.9%) and basic resources (-2, 67%).
In Paris, BNP Paribas finished at the bottom of the CAC 40 (-4.56%) and TechnipFMC lost 4.53%.
Aramis, a subsidiary of Stellantis, fell for its first day of listing on the Euronext Paris market, its share ending 22.7 euros after a fixed IPO price of 23 euros.
The British distribution group Tesco ced 4.07% after reporting a sharp slowdown in sales growth in the United Kingdom in the first quarter.
The “dollar index”, which measures the variations of the American currency against other major currencies, takes 0.43%, the highest for two months, again thanks to the announcements of the Fed on Wednesday and James Bullard on Friday.
The euro is logically lower, 1.1872 dollars. The pound sterling also fell, penalized, in addition to the appreciation of the dollar, by the surprise drop in British retail sales in May.
On the bond market, the yield on 10-year Treasuries, having risen sharply after James Bullard’s statements, fell 1.4549%.
In its wake, benchmark yields in the euro zone also ended up falling.
JP Morgan analysts maintain a long recommendation on US 10-year government bonds, estimating that the first rate hike will not occur until the second half of 2023.
Despite the rise in the dollar, oil is on the rise: a barrel of Brent is up 0.83% to 73.69 dollars and that of American crude (West Texas Intermediate, WTI) by 1.34% to 71.99 dollars.
(Laetitia Volga, said by Jean-Stphane Brosse)