(CercleFinance.com) – The Paris Stock Exchange should open sharply lower on Thursday morning in the wake of Wall Street, cooled by the less accommodating positions than expected of the American Federal Reserve on the trajectory of its rates for 2025.
Around 8:15 a.m., the ‘futures’ contract on the CAC 40 index – December delivery – fell by 110.5 points to 7277.5 points, suggesting a decline of more than 1% in the first exchanges.
As expected, the Fed reduced its key rates last night for the third time this year, bringing them to a range between 4.25% and 4.50%.
On the other hand, Jerome Powell, its president, surprised the markets by evoking the entry into a ‘new phase’ of the central bank’s policy, marked by a slower pace of rate cuts than before.
The new projections show that the institution is only counting on two rate cuts next year, compared to four so far anticipated by investors.
‘After only three rate cuts, the Fed says it is already entering a new phase in its monetary tightening,’ begins Bastien Drut, head of strategy and economic studies at CPR AM.
‘The recent halt to disinflation and the uncertainties linked to the policies of the future administration will push the Fed to be significantly more cautious,’ indicates the analyst.
‘It will only lower rates again in the event of further tangible progress on the inflation front,’ he emphasizes.
This flood of unfavorable information caused the New York Stock Exchange to fall sharply last night, with investors hoping for a more accommodating tone from the Fed in view of the uncertainties surrounding the evolution of the global economy.
The Dow Jones index lost 2.6% while the broader S&P 500 lost 3% and the Nasdaq fell 3.6%.
A sign of the concern sweeping the markets, the CBOE volatility index, nicknamed the ‘fear index’ on Wall Street, jumped from 16 to 28 points to reach its highest level since the month’s episode of volatility. last August.
At this stage, futures contracts only signal a modest rebound of around 0.1% in the major New York indices on Thursday at the opening.
Elsewhere, the entire financial world is seeing red.
On the Tokyo Stock Exchange, the Nikkei index recorded a limited decline (-0.7%) at the end of the session, concerns regarding the evolution of rates in the United States having however revived risk aversion.
On the bond market, Powell’s allusion to a more restrictive monetary policy than expected in 2025 caused the yield on ten-year Treasuries to soar, which reached more than 4.52% last night.
The rise in US bond yields continues to support the dollar against the euro, with the latter hitting the 1.04 mark against the greenback to return to 1.0395.
Crude prices are also overtaken by fears, Brent falling 0.4% to 73.1 dollars while American light crude lost 0.5% to 70.2 dollars.
The trend in Europe could change a little with the Bank of England’s monetary policy decision, expected at 1:00 p.m., even if the recent awakening of inflation in the country leads many analysts to bet on a ‘status quo’.
Investors will also monitor a series of economic indicators, notably the third estimate of US GDP for the 3rd quarter.
Good figures could reinforce the scenario of a less accommodative policy than expected from the Fed after the solid economic indicators published in recent weeks.
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