[Article publié le vendredi 22.04.2002 à 9:36 mis à jour à 10:40, puis 14:00 avec Bourses mondiales (en pied d’article) mais avant Wall Street]
How to tighten monetary policy without plunge the economy into recession? The dilemma of fighting runaway inflation in the United States remains, but the Fed is still hoping for a soft landing.
To halt the erosion of American purchasing power in the face of rising prices, and much to the relief of investors who feared that their capital would also be eroded by a record inflation rate of 7.9% in February (8, 5% in March), the Fed had signaled the release of free money in mid-March by deciding to raise interest rates by a quarter of a percentage point (0.25%). These rates are now within a range of 0.25 to 0.50%.
Rates well below annual inflation, which could rise 9% according to the Fed. But the Federal Reserve chairman was crystal clear about the uncertainty surrounding that forecast:
“Actually, we don’t know, so we’re not going to count on it. †
Faced with uncertainty, the Fed hints it will hit hard
So even if it hopes this will be a spike followed by a dip, the US central bank is taking precautions by hinting last night that at the next meeting of its monetary committee, in early May, its key interest rates have risen faster. then in March, it indicated by the voice of its president, Jerome Powell.
An interest rate hike of half a percentage point “is on the table for the May meeting”he stated during a conversation organized on the sidelines of the meetings of the IMF and the World Bank, where he expressed the doubts of the institution and its desire to significantly improve the situation, for “seeing real progress”†
“We expected inflation to peak now and slow for the rest of the year and then again in 2023. Those expectations have been disappointed in the past and now we really want to see some real progress,” he explained.
He took the opportunity to highlight another factor that can get the economy back on track by alleviating overheating, that of restoring order in supply chains, whose disarray has affected economic activity for two years. pollutes:
“We will no longer rely on an improvement on the supply chain side either”added Mr Powell, although this: “would be great” and “extremely handy to have a soft landing”that is, to fight inflation without sending the economy into recession.
Powell’s statement causes global stock markets to crash
The proactive statements by the head of the US central bank (Fed) on Friday sent a chill to equity markets around the world and pushed bond yields higher.
Following Asian stock markets, major European stock markets fell immediately at the start of Friday’s session, following proactive statements from Federal Reserve president Jerome Powell confirming the scenario of strong and repeated hikes in US policy rates.
Not surprisingly for Michael Hewson, an analyst at CMC Markets interviewed by AFP, who recalls “almost all members” the Fed’s Monetary Committee has forecast an increase of 50 basis points.
“The Fed chairman reaffirmed the urgency of a rapid rate hike and scared many investors”also says Andreas Lipkow, of Comdirect, who also points out to AFP that: “the recent rise (in equities) has been driven by only a few companies”.
In the world financial markets, the decline was accentuated during the morning.
In Paris, the CAC 40 lost 1.14% to 6,638.46 points around 07:50 GMT (then -1.49% around 11:20 GMT) and wipes out all his winnings on Thursday. In London, the FTSE100 yields 0.39% (-0.81% at 11:20 GMT) and, in Frankfurt, on DAX a decrease of 1.31% (-1.73% at 11:20 am GMT). Milan reduced by -1.61% late morning).
The EuroStoxx 50 index fell 1.37%, the FTSEurofirst 300 1.06% and the Stoxx 600 0.99%.
In Asia, the Hong Kong Stock Exchange yielded 0.35%, Shanghai’s 0.23% and Tokyo closed at -1.63%.
It should be noted that Chinese markets were also hit by concerns about the health situation in the country, particularly in Shanghai, where millions of residents are still locked up despite a slight easing of restrictions on Wednesday.
After opening notably higher on Thursday, Wall Street indices reversed after Jerome Powell’s announcement and fell past -1% for the Dow Jones until -2% for the Nasdaq.
Markets are therefore reacting very strongly to this option of a 50 basis point increase in the federal funds’ interest rate target, which Jerome Powell says is on the agenda for the next monetary policy meeting (May 3-4).
The scenario of a series of increases towards the end of the summer
For investors, the Fed has just implicitly validated their preferred scenario of a series of half a percentage point gains over the coming months.
Following these comments, Nomura analysts announced that they expect on increases of 75 basis points in June and then in July, which would be the fastest increase since 1994.
Similar development seen by Michael Hewson (CMC Markets, quoted above) for those the markets fear: “that the Fed is not going any further and longer, that is, by the end of the summer it will continue with two more 50 basis point hikes.”
This outlook also influences interest rate expectations in Europe: the money markets are now charging an 80 basis point rate hike by the European Central Bank (ECB) towards the end of the year.
Eurozone government bond yields also strengthened their gains after the release of the first results of the S&P Global PMI surveys, which indicate that private sector activity growth in France is at its highest in more than four years.
On Thursday, following Powell’s announcement, US 10-year Treasury yields rose to 2.95% on Thursday in the US bond market, not far from the three-and-a-half-year record recorded on Wednesday (2.97%). † The German government bond rose by nine basis points on Thursday to reach 0.943%. But on Friday at the start of European trading, they were stable.
Tech, luxury and distribution in red
In this context, all major sectors of the European stock market are moving into the red, with the most notable declines for advanced technologies (-2.22%) and distribution (-2.12%†
Biggest drop on the Paris stock exchange, that of Kering stock, which fell 6.36% on the Paris stock on Friday morning, after the publication of the turnover of the luxury group that investors say revealed disappointing sales for Gucci. The health situation in China in particular has had an impact.
In Kering’s wake, the entire luxury sector fell: LVMH lost 2.10%, Hermès 2.95%, Burberry 2.84%, Moncler 3.69%, Salvatore Ferragamo 2.57% and even Richemont, which lost 3.36%. yielded.
Renault, which rose at the opening, fell to -1.57% around 11:30 a.m., after the volume decline of 17.1% in the first three months of the year, the lowest since 2009.
Casino, up 1.37% on opening, the market welcomed a return to revenue growth in January-March, thanks in part to Brazil, the second-largest market. But the price started to fall again in the morning (at -0.25% around 11 a.m., Paris time).
The leading European publisher of SAP software (-3.22% to 96.20 euros) reported an 11% increase in its turnover to 7.1 billion euros in the first quarter. The end of operations in Russia should weigh up to EUR 300 million on sales this year, the company said.
On the side of oil and bitcoin
At around 0730 GMT, a barrel of Brent from the North Sea for June delivery fell 0.78% to $107.46.
The barrel of American West Texas Intermediate (WTI) for same month delivery lost 0.67% to $103.10.
Bitcoin fell 0.60% to $40,390.
(with AFP and Reuters)
