(Paris) Global stock markets were weighed down on Thursday, most of them at three-month lows, the day after the US Federal Reserve tightened the screw, its strongest since 1994, and investors feared a devastating impact on the Mondial economy.
Posted at 9:43am
Updated at 12:40 p.m
European indices closed lower. Frankfurt, Milan and London lost more than 3% while Paris lost 2.39%.
The New York Stock Exchange was equally gloomy. As of 11:05 am, the heavily tech-tinged NASDAQ suffered the most (-4.10%), while the Dow Jones and S&P500 lost 2.44% and 3.27%, respectively.
The day before, however, Wall Street had initially welcomed the Federal Reserve’s (Fed) determination to fight inflation despite an unencouraging growth message.
The monetary institute announced that it would raise its key interest rate by 0.75 percentage points, with most of its governors now aiming for a range of 3.25 to 3.50% by the end of the year.
“Given that inflation is certain to remain high this summer, it seems plausible that the Fed will hike rates by 75 basis points in July and 50 basis points in September” before targeting a 25 basis point hike at the start of winter falls behind in basis points, forecasts Vincent Juvyns, strategist at JP Morgan AM.
Perhaps at the expense of economic activity. Markets on Thursday recorded “falls across the board, with major European markets hitting three-month lows,” notes CMC Markets analyst Michael Hewson.
The Swiss central bank surprised by raising interest rates by half a point on Thursday, but the Bank of England (BoE) had “the merit of continuity,” according to Florian Allain, manager at Mandarine Gestion.
Unlike the Fed, it has not decided to raise interest rates more sharply in the face of inflation, but it “will be particularly vigilant for signs of persistent inflationary pressures and will respond vigorously if necessary.”
After a dismal start to the session, the euro and pound recovered modestly against the dollar, with the shared currency gaining 0.69% to $1.0516, while the pound surged 1.19% to $1.2331.
On the bond market, interest rates on the debts of European countries largely continued to rise on Thursday, but tensions eased slightly compared to the beginning of the week, especially on Italian debt, after a meeting emergency European Central Bank on Wednesday.
The ECB instructed its teams to “speed up” the development of a new “anti-fragmentation” tool to tackle excessive interest rate spreads between northern and southern eurozone countries.
Federal Finance Minister Christian Lindner said on Thursday there was “no reason to worry about interest rate differentials in Europe”.
Technology companies, which are particularly dependent on interest rates to fund their growth, took a hit.
In New York, Alphabet, Google’s parent company, lost 3.07%, Microsoft 2.88%, Apple 3.82%, while Meta fell 11.95%, Hello Fresh fell 6.97% and Delivery Hero fell 9.24% % collapsed.
In Paris, STMicroelectronics lost 6.19% and Dassault Systèmes 2.50%. Deliveroo fell 6.19% in London.
Energy levels suffer
Energy sector stocks fell after further cuts in gas supplies from Russian giant Gazprom, whose boss said on Thursday the company would apply its own rules to its products.
In Frankfurt, Uniper lost 9.73% and Siemens Energy 3%. In Paris, Engie fell 7.29% after noting a “supply drop” although it did so without “supply impacting” customers.
Eni, which said Gazprom would deliver just 65% of requested volumes on Thursday, also fell 4.89% in Milan, while Enel slipped 2.81%.
Besides oil and bitcoin
The price of a barrel of North Sea Brent fell 0.14% to $118.29 and that of a barrel of American WTI edged up 0.19% to $115.59 by 11 am.
Bitcoin fell 3.20% to $20,950.