Stock markets fell sharply on Friday after the announcement of much stronger inflation than expected in the United States, where it could cause a tightening of monetary conditions with further rate hikes. Wall Street was down sharply: around 4:50 p.m. GMT, the Dow Jones fell by 0.91%. Heading into their worst week since December, the S&P 500 was down 1.03% and the Nasdaq 1.55%.
In Europe, after an opening on the rise, the indices ended clearly in the red: Paris lost 1.78%, Frankfurt 1.72%, Milan 1.07% and London 0.37%.
Inflation has risen again over one year in the United States, according to the PCE index, favored by the American Federal Reserve (Fed). Prices rose 5.4% in January from a year earlier, still far from the institution’s 2% target. Even more notable for investors, this figure is significantly higher than their forecasts, which were around 4.9%.
Loading…
Towards stronger-than-expected monetary tightening?
These figures “reinforce bets on increases in the Fed’s key rates at the next three meetings”, writes Edward Moya, an analyst at Oanda. Especially since “the American consumer still looks in good shape”, judging according to him by the sharp increase in income and expenditure published in the same PCE report.
Raising the key rate is the main tool used by central bankers to try to control inflation, at the cost of slowing down economic activity. “Investors are gradually coming out of denial,” notes Benoît Gérard, of Natixis IM. They are now forecasting stronger monetary tightening than a few weeks ago, more in line with statements by central bankers.
On the bond market, rates rose in Europe and the United States, especially those for short maturities, which are the most sensitive to central bank policies. In Europe, the change in Germany’s Gross Domestic Product in the fourth quarter of 2022 has been revised downwards, to -0.4%.
Loading…
READ ALSO
CAC 40: the Paris Bourse opens higher
The dollar strengthens, the euro falls
Oil prices rose around 4:30 p.m. GMT, a barrel of Brent from the North Sea for delivery in April gained 0.65% to 82.75 dollars and that of American WTI at the same maturity 0.77% to 75.97 dollars. The price of European natural gas was stable at 50.70 euros per megawatt hour.
On the foreign exchange market, the dollar strengthened against the other major currencies around 4:30 p.m. GMT. The euro fell 0.43% to 1.0550 dollars. The pound yielded 0.61% to 1.1940 dollars. The yen fell 1.20% against the dollar, to 136.31 yen to the dollar. The next governor-designate of the Bank of Japan, Kazuo Ueda, has taken a stand in favor of continuing the ultra-accommodative monetary policy in place for 10 years. This also pushed the Tokyo Stock Exchange up 1.29%. For its part, bitcoin fell 2.75% to 23,220 dollars.
READ ALSO
Stock market: can inflation in the United States fall to just 2% in one year?
