Possible aggressive monetary tightening by the US Federal Reserve raises fears of an economic slowdown on global stock markets, which fell sharply on Wednesday.
• Read also: LIVE | 42nd day of the Russian invasion
• Read also: Russia’s economy begins to crack under the weight of sanctions
The New York Stock Exchange opened lower: around 2:15 p.m. GMT, the Dow Jones yielded 0.77%, the S&P 500 1.27% and the Nasdaq, with strong technological coloring, 2.37%.
After initial trading close to balance, European markets tipped sharply into the red, with London down 0.86%, Frankfurt down 2.51%, Milan 2.83% and Paris down 2.78% to 2:15 p.m. GMT.
Investors were still digesting tougher-than-expected remarks from Federal Reserve Governor Lael Brainard on Tuesday, who is known for her dovish stances on monetary policy.
She assured that the Fed was ready to “act more strongly” once morest inflation, in particular by selling financial assets, from its next monetary meeting in May.
“The most crucial question for operators is related to the reduction of the Fed’s balance sheet”, a measure which would be a “strong and significantly aggressive gesture” and a message “that the + party may be over +”, underlines Pierre Veyret, ActivTrades analyst.
This prospect of aggressive monetary tightening has Deutsche Bank analysts fearing an economic recession in the United States by the end of the year.
The minutes of the last meeting of the institution’s monetary policy committee, expected following the close of European markets, will allow market players to find out more.
Interest rates continued to rise: that for the 10-year American loan stood at 2.599%, the highest since 2019. Those in Europe also tightened significantly, the German 10-year rising to 0.647%.
The Fed’s publication does not make the markets forget the Ukrainian conflict either. The European Union will have to take sanctions on Russian oil and gas “sooner or later”, declared the President of the European Council, while the Twenty-Seven are currently discussing new sanctions on coal and investments in the country.
The Russian Finance Ministry announced on Wednesday that it had settled a dollar debt in rubles following the refusal of a foreign bank to make the payment in dollars, which exposes it to a risk of default, one of the signs that the he Russian economy is beginning to crack under the weight of Western sanctions.
The conflict, supply difficulties and the resumption of COVID-19 contamination are weighing on economic activity elsewhere in the world. In particular in China, where activity in services plunged in March to its lowest level since the beginning of 2020, and in Germany which experienced a sharp drop in orders placed with industry in February.
Faced with rising interest rates in the bond market, technology stocks retreated. They need low rates to finance their growth and to enhance their long-term profits.
In New York, the giants Apple (-1.98%), Alphabet (-2.43%), Meta (-2.65%), Amazon (-2.92%) and Microsoft (-2.42%) were all in the red. Chinese companies listed in the United States also lost ground, such as Alibaba which lost 3.53% or JD.com 3.55%. In Europe, Capgemini (-5.05%), Darktrace (-2.33%) or HelloFresh (-8.62%) also suffered.
Even more exposed, semiconductor manufacturers suffered from international tensions and restrictive measures in China. Infineon fell by 5.26%, ASML by 5.06%, STMicroelectronics by 4.60%, Nvidia by 2.73%, AMD by 1.99%.
Oil prices were down on Wednesday, pending U.S. crude inventories.
The barrel of WTI at maturity, but lost 0.64% to 101.30 dollars, while Brent North Sea, the European benchmark, for delivery, but yielded 0.31% to 106.32 dollars around 2:00 p.m. GMT.
In the currency market, the ruble temporarily returned to the level at which it closed on February 23 (81.16 rubles per dollar), before the Russian invasion of Ukraine. Around 2:00 p.m. GMT, it was trading at 83.4472 rubles per dollar.
The euro remained weak (+0.04% to 1.0910 dollars), once morest the greenback, galvanized this week by the policy of the Fed.
Bitcoin fell 3.73% to $44,140.
