SHARES MOVE, THE DOLLAR FALLS, POWELL LITTLE TAPERING
by Laetitia Volga
PARIS (Reuters) – European stock markets ended higher on Friday after a speech deemed accommodating by US Federal Reserve Chairman Jerome Powell, who reaffirmed the provisional nature of inflation and refrained from giving a date on a possible reduction in asset purchases.
In Paris, the CAC 40 gained 0.24% to 6,681.92 points. The British Footsie gained 0.32% and the German Dax advanced 0.37%.
The EuroStoxx 50 index ended up 0.51%, the FTSEurofirst 300 0.37% and the Stoxx 600 0.43%.
On Wall Street, the Nasdaq Composite and the Standard & Poor’s-500 hit records after Jerome Powell’s speech, which gave no indication of a slowdown in asset purchases of the institution, the main subject of investor concern for several weeks.
Speaking at the Jackson Hole symposium, the Fed chairman, however, said he agreed with the majority of his regional counterparts that a ‘tapering’ could be appropriate “this year”.
“I think the market appreciated because it’s part and parcel of the wait-and-see approach taken by Powell (…) I think generally what he has done is probably push back the explicit announcement and the start of ‘tapering’ in November, (…) rather than at the end of the third quarter in September, “said David Petrosinelli, senior trader at Insperex.
Alan Ruskin, head of international strategy at Deutsche Bank, said his biggest worry “would be that the Fed is wrong about the temporary nature of inflation and that it needs to brake sooner than expected.”
VALUES IN EUROPE
A large part of the European compartments ended up rising and the commodities sector stood out, its Stoxx index advancing by 1.92% with the rise in metal prices.
In Paris, ArcelorMittal finished at the top of the CAC 40 with a gain of 2.80% and in London, Rio Tinto, BHP, Glencore and Anglo American gained 2.15% to 3.01%.
Just Eat Takeaway fell 7.53% in Amsterdam after New York City Council passed legislation to cap the commissions meal delivery companies charge restaurants.
The prospect of maintaining the Fed’s current monetary policy is logically reflected in US sovereign debt yields. The yield on ten-year Treasuries fell 3 basis points to 1.3121%, against around 1.337% shortly before Jerome Powell’s intervention.
The yield on the ten-year German Bund, for its part, ended around equilibrium.
The much-anticipated speech from the Fed chairman, seen as broadly accommodating, pushed the dollar down.
Jerome Powell said a possible tapering was not a harbinger of a rate hike later.
The “dollar index”, which measures the evolution of the greenback against a basket of benchmark currencies, lost 0.39% at the lowest for ten days.
The euro took the opportunity to momentarily rise above $ 1.18 for the first time since August 13.
The oil market is rising amid concerns over supply disruptions as several oil companies have started shutting down production in the Gulf of Mexico in anticipation of a tropical storm, which could strengthen into a hurricane.
Brent gained 2.14% to 72.59 dollars a barrel and US light crude (West Texas Intermediate, WTI) 2.12% to 68.85 dollars.
With Jerome Powell’s speech, today’s indicators had no effect on the trend.
The rise in consumer spending by US households slowed to 0.3% in July and the core PCE index, which excludes energy and food, also rose 0.3%, after increasing by 0.5% in June.
US household morale deteriorated in August with an index of 70.3, the lowest since December 2011, according to the final results of the monthly survey from the University of Michigan.
(Laetitia Volga, edited by Bertrand Boucey)