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The Fed worries the world markets, China brings down luxury and oil

Global stock markets adopted a defensive stance on Monday ahead of the US central bank’s monetary policy meeting and as the disruptions threatening economic growth continue unabated.

In Europe around 0730 GMT, Paris fell by 1.17%, Frankfurt by 0.74% and Milan by 0.82%. The European reference index, the Eurostoxx 50 yielded 1.50%.

London is closed for a public holiday, as are Hong Kong and Shanghai.

Tokyo ended down 0.11%, wait-and-see before the meeting of the Federal Reserve (Fed). The stock market will not reopen until Friday, after three days of closure for “Golden Week” in Japan.

A catastrophic month of April for Wall Street (-13%)

Friday, the New York Stock Exchange had recorded even more severe losses, the Nasdaq having in particular tumbled by more than 4% on Friday, not to mention its underperformance of more than 13% over the whole of April, its worst fall since 2008. The index of technology stocks was weighed down by disappointing results from digital giants such as Amazon and Apple.

A month of April in a spin for Wall Street which ends up weighed down by tech, inflation, and even… oil

On Wednesday, the Fed will most likely tighten rates

In March, the Federal Reserve (Fed) had started a rather cautious rate hike (+0.25 percentage points), but it was the first since 2018.

At the end of its two-day meeting, Tuesday and Wednesday, the Monetary Policy Committee (FOMC) will endorse this time, except surprise, an increase of half a percentage point, to bring them within a range of 0.75% to 1%.

It was Jerome Powell, the president of the powerful institution, who himself announced that this increase would be “on the table”.

Inflation: raising rates without falling into recession, the difficult but possible bet of the United States (Fed)

The institution should also record the beginning of the reduction of its balance sheet, all in an attempt to fight against inflation at its highest for 40 years in the United States.

“The market currently expects the fed funds rate to be 2.75% to 3.0% at year-end, compared to 0.25% to 0.50% today”, which notably implies a hike from 0, 75 percentage points in June, notes John Plassard, investment specialist at Mirabaud.

But for Vincent Boy, an IG analyst, “the chairman of the Federal Reserve could on the other hand soften the tone on the next rate hikes”, in order to calm investors’ expectations and allow the markets to rebound, as had been the case. case in March.

China worried about the return of mass confinements

The session was also weighed down by concerns about China, where manufacturing activity fell in April to its lowest level since February 2020 due to the confinements of the country’s major cities.

In Beijing, the authorities announced on Saturday to strengthen measures intended to fight against Covid-19 by making new tests compulsory to access certain public places.

“The interventions to support the economy announced by the party in recent weeks do not stem the decline in markets and activity,” notes Vincent Boy, analyst at IG.

On the geopolitical front, the European Commission is preparing a 6th package of sanctions against Russia’s oil ecosystem, following Gazprom’s announcement to stop gas deliveries to Bulgaria and Poland.

Luxury and oil misguided for fear of weakened Chinese demand

The luxury sector, very dependent on the Chinese market, suffered losses on Monday. In Paris, Kering yielded 1.95%, LVMH 1.60%, Hermès 1.90%. In Milan, Moncler lost 2.05%, Tod’s 1.26%. In Zurich, Richemont fell by 2.16%.

Oil prices were affected by fears over Chinese demand for black gold, so the world’s largest importer of raw materials continues to apply a zero Covid policy.

Around 07:25 GMT, a barrel of Brent from the North Sea for delivery in July, which is the first day of trading as a benchmark contract, was down 0.23% at 106.85 dollars.

The barrel of American West Texas Intermediate (WTI) for delivery in June lost 0.67% to 103.99 dollars.

The euro was stable at $1.0546, a historically low level.

Bitcoin gained 1.75% to $38,995.

(with AFP)