A trader works on the Frankfurt stock exchange
by Claude Chendjou
PARIS (Reuters) – European stocks closed lower on Tuesday, hurt by the World Bank’s economic forecasts and interest rate fears, while Wall Street indexes moved without much change in the mid-session absent Jerome Powell’s comments, the president of the Fed, on the evolution of the cost of credit.
In Paris, the CAC 40 closed down 0.55% at 6,869.14 points. The UK Footsie lost 0.39% and Germany’s Dax -0.12%.
The EuroStoxx 50 index fell by 0.27%, the FTSEurofirst 300 by 0.58% and the Stoxx 600 by 0.59%.
The World Bank lowered its 2023 growth forecast on Tuesday to near-recession levels for many countries. The international organization is therefore counting on global growth of 1.7% for this year, which would mark the weakest increase in almost 30 years, excluding the recessions of 2009 and 2020.
As regards interest rates, Jerome Powell, chairman of the US Federal Reserve (Fed), contented himself with declaring at the Bank of Sweden symposium that the restoration of price stability, when inflation is high, may require unpopular short-term measures.
Two of his colleagues, Mary Daly and Raphael Bostic, said on Monday evening that interest rates in the United States, currently between 4.25% and 4.5%, could peak above 5% for an extended period. reviving fears of more significant monetary tightening than expected despite the slowdown in wage growth.
In Europe, European Central Bank (ECB) Governing Council member Isabel Schnabel said on Tuesday that financing conditions should be tighter and that inflation will not come down on its own. Unicredit estimates the peak of interest rates in the euro area at around 3.5% against the current 2%.
In Europe, all sectors close in the red, the most consistent drop is recorded in the distribution index assets (-1.36%) and in that of basic resources (-1.16%), sectors sensitive to a decline in ‘economy.
The new technologies sector (-0.55%) was instead affected by the rise in interest rate expectations.
In Paris, in contrast, Renault gained 2.17% thanks in particular to the agreement with Punch Torino in low-emission diesel engines. Les Echos newspaper also reported that France will not oppose the rebalancing of the alliance between Renault and Nissan.
In Frankfurt, the German energy company Uniper lost 1.45% after the announcement of the resignation of the chairman of the board of directors Klaus-Dieter Maubach and his deputy David Bryson following the nationalization of the group.
In London, consumer stocks such as Ocado (-3.06%) suffered as NielsenIQ said it expects limited growth of about 5% in UK food retail sales this year amid a recession .
As of the close in Europe, the Dow Jones was up 0.05%, the Standard & Poor’s 500 up 0.02% and the Nasdaq up 0.08%, investors digested Jerome Powell’s latest statement with a view now turning to US consumer price data due on Thursday.
In values, Microsoft advances by 0.43%, the group plans to invest 10 billion dollars (about 9.3 billion euros) in OpenAI, owner of the ChatGPT chatbot, according to the media Semafor.
Broadcom fell 3.2%, the Bloomberg agency reported that Apple (-0.88%) plans to replace the group’s Wifi and Bluetooth chips in 2025 with its own products.
Boeing fell 0.35% after Morgan Stanley downgraded its recommendation. The American aircraft manufacturer is also penalized by the setbacks of Virgin Orbit, whose share fell by 12.17% after the failure to launch a satellite into space.
RATES The prospect of prolonged monetary tightening drove bond yields on Tuesday: that of the 10-year German Bund rose 8.7 basis points to 2.30% and that of US Treasuries of the same maturity jumped 10.9 points to 3 .62% in closing trade in Europe.
FOREIGN EXCHANGES In foreign exchange, the dollar appreciated by 0.29% against a basket of six major currencies after hitting a seven-month low the day before.
The euro remained virtually stable at $1.073, while the British pound settled at $1.2154 (-0.24%).
Oil prices up after the intervention of Jerome Powell whose absence of comments on rates does not allow to measure the impact on the economy: Brent increases by 1.05% to 80.49 dollars a barrel and light crude USA (West Texas Intermediate, WTI) up 1.25% to $75.56.
The London Metal Exchange (LME), the London exchange specializing in metal futures, said on Tuesday it would unveil its action plan for the crisis hitting the European Union by the end of last year’s nickel first quarter.
(Written by Claude Chendjou, edited by Blandine Hénault)