(ABM FN) The Brussels stock exchange is set to open significantly lower on Thursday in the wake of the Federal Reserve’s interest rate decision Wednesday evening. Futures on the Euro Stoxx 50 index pointed to a loss of just 2.5 percent about an hour before the stock market bell.
On Wednesday, the Bel20 rose 1.3 percent to 4,080.15 points.
In the run-up to the interest rate decision, the American stock markets were still in the green on Wednesday with a gain for the S&P 500 of more than 2 percent. However, gains faded after the interest rate decision, with the central bank keeping rates unchanged as expected and stating its intention to raise interest rates by mid-March in an attempt to contain high inflation. At the closing buzz, the US main index was narrowly in the red.
Negatively received data from Tesla and especially Intel on Wednesday, meanwhile, are weighing on sentiment, and US index futures point to a significantly lower opening on Wall Street this afternoon. In Asia, the stock markets in Tokyo and Seoul lost more than 3 percent this morning.
Share prices have been shooting up and down in recent days, partly due to disappointment with quarterly figures so far, concerns about geopolitical tensions and the coronavirus, but mostly about the inevitable Federal Reserve rate hikes.
Speaking about the path to follow regarding future rate hikes, Fed Chair Jerome Powell said on Wednesday evening “there is a lot of room to raise interest rates without jeopardizing the labor market.” Regarding the rebalancing, Powell said final decisions on the matter will be made at the next Fed meetings. He did say, however, that the Fed may decide to reduce its balance sheet faster than during the previous cycle.
“I don’t understand why investors are just now getting the message,” said Brown Advisory bond strategist Tom Graff. The US stock markets lost all gains from earlier in the day during chairman Powell’s explanation of the interest rate decision.
According to Graff, investors are only now taking the Fed’s tightening plans seriously after several Fed bankers indicated that they are looking at ways to deleverage. “Investors who think interest rates would remain extremely low are wrong.”
The unemployment rate in the US is now below 4 percent and inflation at 7 percent, Deutsche Bank economist Jim Reid explained the need for an interest rate hike. Deutsche Bank is counting on 4 rate hikes this year, but there may be more.
However, Upholdings analyst Robert Cantwell also stated that “the market seems to have lost its mind for a while, creating great opportunities for long-term investors in growth stocks”.
“Companies that will generate more money in the future than they do today have been punished the hardest, while companies with actual debt have jumped the dance. That is the world upside down,” Cantwell said.
Intel, Tesla and oil
On Wednesday after hours, Intel reported that net profit fell in the past quarter, to $4.6 billion from $5.9 billion a year earlier, and the chip giant performed below expectations. Shares fell just under 3 percent in after-hours trading.
Tesla also announced a profit of $5.5 billion in 2021 on sales of $53.8 billion, beating analyst expectations. In 2020, Tesla made a profit of $721 million on sales of $31.5 billion. This was the first year in which Tesla made a profit. In after-hours trading, however, the share fell by just under 1 percent.
In Asia, the main indices are turning dark red this morning.
The US oil future, however, is only half a percent lower this morning, after the future closed on Wednesday at its highest level in 7 years, partly due to heightened concerns about a Russian attack on Ukraine.
“If Russia invades Ukraine, oil prices will shoot through the roof,” oil analyst Tariq Zahir of Tyche Capital Advisors said. If the conflict between the two countries escalates, it will most likely lead to oil-related sanctions on Russia from the West. As Russia is one of the largest oil producers in the world, this will further tighten global oil supply, Zahir warns.
A February futures for a barrel of West Texas Intermediate crude traded 2 percent higher in New York on Wednesday, closing at $87.35.
The dollar gained against the euro in foreign exchange markets after investors received confirmation from the interest rate decision that the Fed wants to speed up its rate hikes. This morning the euro/dollar currency pair was trading at 1.1219 against 1.1300 prior to Wednesday’s interest rate decision.
Today, investors are paying attention to the figures of McDonald’s and in particular Apple. At the macroeconomic level, attention is paid to weekly aid requests in the US and orders for durable goods.
Company news
Galapagos will appoint Paul Stoffels as CEO of the biotech company as of April 1, 2022. Stoffels will succeed Onno van de Stolpe. Stoffels previously served as chief scientific officer of J&J, where he headed the company’s research and product pipeline. Trader Bert van der Pol of Today’s Group pointed this morning to a buy recommendation from Citi for Galapagos.
Jefferies has lowered Bpost’s advice from Buy to Hold with a target price cut from 10.00 to 7.50 euros.
Gimv has acquired a majority interest in Groupe GSDI, the producer of technical adhesive films.
Wall Street closing positions
The S&P 500 index closed 0.2 percent in the red at 4,349.93 points on Wednesday, while the Dow Jones index fell 0.4 percent to 34,168.09 points. Technology exchange Nasdaq made a stop at 13,542.12 points.
Bron: ABM Financial News
From Beursplein 5, the editors of ABM Financial News keep a close eye on developments on the stock exchanges, and the Amsterdam stock exchange in particular. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.
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