By Swann Collins, investor, writer and consultant in international affairs. Eurasia Business News – April 10, 2022
European stock markets ended higher on April 14 after the European Central Bank (ECB) did not announce an acceleration of its monetary tightening. In Wall Street, the stock indices were trading in disorder at mid-session after the publication of mixed quarterly results by several major banks.
In Paris, the French CAC 40 closed with a gain of 0.72% to 6,589.35 points. The British Footsie gained 0.47% and the German Dax 0.62%.
The EuroStoxx 50 index jumped by 0.54% and the Stoxx 600 by 0.67%.
Both stock indices increased their gains in session immediately after the statement of the European Central Bank, which confirmed thursday its intention to end its purchases of bonds on the markets in Q3 2022 without giving any new indication on the timing of the tightening of its monetary policy.
ECB President Christine Lagarde stressed today that the 19 eurozone countries were particularly exposed to the economic consequences of the conflict in Ukraine and that it had already undermined confidence and heightened tensions in supply chains already battered by the coronavirus pandemic.
The eurozone’s monetary institution is leaving its key rates unchanged, despite inflation reaching 7.5% in March. The end to asset purchases by ECB will begin in the third quarter without specifying its timing. Its president, Christine Lagarde, justifies this wait-and-see attitude by the war in Ukraine, which will weigh on European growth, but she says she is ready to intervene if circumstances so require.
The ECB confirmed at its Governing Council meeting its willingness to tighten monetary policy by ending its bond asset purchase programme in the third quarter of 2022. Until then, it will steadily reduce its net purchases of monthly bonds, by 40 billion euros in April, 30 billion euros in May and 20 billion euros in June, confirming previous plans, the statement said.
After these statements, the money markets only anticipate an increase of about 60 basis points by the end of the year in the ECB’s deposit rate (currently set at -0.5%), against 70 points at the beginning of the day.
At the same time, US bond yields rose more sharply than their European counterparts, as the ECB’s strategy was considered more cautious than that of other major central banks such as the US Federal Reserve, the Bank of England or the Bank of Canada, which on Wednesday raised its main policy rate by 50 basis points. The U.S. Fed could also raise rates by half a point at its May meeting.
At the close of trading in Europe, the yield on ten-year US Treasuries jumped 11.5 points to 2.802%, while that of the German ten-year Bund ended up 6.1 points to 0.8390%. The French OAT rate of the same maturity advanced by 6.9 points to 1.331%.
VALUES IN EUROPE
In Europe apart from high-tech (-0.3%), all the main sectors of the Stoxx 600 ended in green, with cyclical consumption (+1.1%) leading the way, followed by industry (+0.7%).
The transport and leisure sectors (+2.9%) stood out in particular with Wizz Air (7.7%) announcing encouraging forecasts for this summer. Air France-KLM gained 1.9% and Lufthansa 2.6%.
Luxury group Hermès gained 2.6% after reporting better-than-expected first-quarter revenue, while French hosting provided OVH lost 5.3% after its first-half accounts.
Elsewhere in Europe, Ericsson fell 5.03 percent as the telecoms equipment maker reported a drop in its quarterly operating profit and said it may face a fine in connection with an investigation in the United States into alleged corruption in Iraq.
Atlantia advanced 4.3% in Milan, as the holding company of the Benetton and Blackstone family presented a takeover bid for the Italian infrastructure group that values their target at 58 billion euros.
VALUES IN WALL STREET
At the time of the close in Europe, the Dow Jones was up 0.21%, while the Standard & Poor’s 500 was down 0.5% and the Nasdaq 1.2%.
The rise in bond yields weighed on technology stocks whose index fell by 1.1% with Amazon and Apple in particular, which lost about 1.5%.
Twitter stocks fell 0.7% despite Elon Musk’s proposal to buy the social network for just over $41 billion (€37.9 billion). The tech billionaire already bought a 9.2% stake in Twitter in early April.
The major U.S. banks, for their part, reported mixed results marked by lower profits in the first quarter but above Wall Street’s expectations. Wells Fargo was down 4% and Goldman Sachs 0.5% while Morgan Stanley and Citigroup were up about 1.2%. The banking sector index lost 1% and the finance index 0.4%. The perspective of hike rates by the U.S. Federal Reserve will put pressure on the U.S. loaning market, with already indebted families having to leave their house to payback mortgage.
Prices for U.S. imports advanced 2.6 percent in March following a 1.6-percent increase in February and a 2.0-percent rise in January, the U.S. Bureau of Labor Statistics reported today. Higher fuel prices drove the March advance and nonfuel prices also increased. U.S. export prices rose 4.5 percent in March, after advancing 3.0 percent the previous month.
In the foreign exchange market, the euro hit a two-week low of 1.0758 against the dollar after Christine Lagarde’s statements.
“We will deal with interest rates when the time is right,” the ECB president said at her press conference.
The dollar gained 0.66% against a basket of international currencies, supported among other things by retail sales figures and expectations of a rate hike by the Fed.
The oil market, which had gained about 4% on Wednesday, is trending lower on the eve of the extended Easter weekend, which usually see a reduced number of buyers.
Brent price fell 1% to $107.69 a barrel and U.S. light crude (West Texas Intermediate, WTI) price decreased 1.1% to $103.05.
Read also : How to invest in gold
Gold prices hit today a high $ 1,981 per troy ounce and were stable at $ 1,974 at 02:28 PM NY Time, gaining 2.86% on the past 30 days. Silver prices hit $ 25.90 per ounce, gaining 2.90% in one month.
The yellow metal has always been a great hedge against inflation because it rises in price when the cost of living standards rises. Gold can store value efficiently, when paper currency loses purchasing power because of inflation.
U.S. inflation again reached a record, surging to 8.5% in March on annual terms, after 7.9% in February. This is the highest level of inflation never seen in the United States since December 1981 and the dynamic has been here for months. U.S. inflation already reached 7.5% in January after hitting 7% in December 2021, 6.8% in November and 6.2% in October.
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© Copyright 2022 – Swann Collins, investor and consultant in international affairs.