(BFM Bourse) – The Paris Stock Exchange is moving in the red this Thursday, December 19 as the market becomes aware that the Fed should slow down rate cuts next year. The semiconductor sector is suffering.
The Fed is putting the Paris Stock Exchange back under pressure. The CAC 40 lost 1.15% to 7,299.95 points in the early afternoon of Thursday, December 19.
Like all global markets, the Paris Stock Exchange is penalized by announcements from the American Federal Reserve (Fed). Wall Street also closed very sharply lower on Wednesday evening, with the S&P 500 losing 3% and the Nasdaq Composite falling 3.6%.
On Wednesday evening, the Fed lowered its key rates by a quarter of a percentage point, which was expected by almost 99% by investors.
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Towards fewer rate cuts in 2025
The economic and monetary projections (“dots plots”) of the various members of the American central bank have scolded investors. This document, which is published quarterly and is not strictly speaking a forecast, shows that the median expectation of Fed members for 2025 incorporates only 50 basis points (0.5 percentage points) of cuts key rates.
However, in previous dot plots, in September, members anticipated a rate cut of 100 basis points in 2025.
In addition, Fed members revised their inflation projections upwards, counting in particular on a 2.5% increase in the PCE index (an alternative measure of inflation), compared to 2.1% previously. .
“After only three rate cuts, the Fed says it is already entering a new phase in its monetary tightening,” concludes Bastien Drut. “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. It will only lower rates again in the event of further tangible progress on the inflation front. “inflation”, he concludes.
Semiconductors decline
These restrictive announcements from the Fed propelled American bond rates. The yield on the 10-year US Treasury bond rose from 4.39% to over 4.5% in a matter of minutes.
On the value side, only a few defensive stocks are holding up. On the CAC 40, Thales takes 1% and Eurofins 1.1%.
Conversely, STMicroelectronics lost 5.3%, showing the biggest decline in the Parisian index. Soitec, another semiconductor group, is also suffering, losing 5.7%.
The two companies are penalized by the disappointing prospects of their American comparable Micron, which lost 12% in pre-opening on Wall Street.
On other markets, the euro gained 0.46% against the dollar. But the euro zone currency had fallen by more than 1% on Wednesday evening after the Fed’s announcements, falling below $1.04 for the first time since the end of 2022.
Oil is falling a bit. The February contract on Brent from the North Sea fell 0.3% to 73.14 dollars per barrel while that of the same maturity on WTI listed in New York lost 0.26% to 70.40 dollars per barrel.
Julien Marion – ©2024 BFM Bourse
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