Start of session in the red for the main European markets after the monetary tightening by the Fed last night: the US central bank raised interest rates by 75 basis points, bringing the level between 3 and 3.25 percent . the third maxi-increase by the US Central Institute which also signaled its intention to continue in the squeeze.
In the aftermath of the Fed move, Milan lost 0.73 but recovered slightly from the first trading started down by more than one percentage point. Shortly after 9.30, the Dax in Frankfurt is in the red by 1.24%, the Cac40 in Paris by 1.16% while in London the Ftse100 loses 0.60%.
Starting in negative territory also for the BTP with the ten-year increase to 4.16%.
The S & P500 closed down 1.7% on Wall Street last night.
Meanwhile, the euro is once again losing ground and is at the lows of the last twenty years. This morning the exchange rate against the dollar moves in the 0.982 area.
Operators are frightened by the look at the future of monetary policies: members of the Federal Open Market Committee have made it clear that they expect further increases in the cost of money in the coming months. The peak should be reached around the middle of next year at 4.6%. The objective of the Fed maneuver is to put an end to the inflation race and bring the cost of living back to the 2% area. In August, the US inflation rate stood at 8.3%.
“It is significant that the prospects for a rate hike of 75 basis points have quickly become part of the consensus,” writes Michael Metcalfe, Head of Macro Strategy at State Street Global Markets. Has too much alarmism been created? Markets have repeatedly tried and failed this year to anticipate the spike in US rates. However, with the Fed now leaning towards a peak well above 4% and tight monetary policy until 2025, the hawks have reached what should be their high point and it will take another significant inflation shock. before rates rise further. For the moment, PriceStats’ inflation trend appears to be more favorable, as the first 17 days of the month indicate that prices have remained unchanged for the second consecutive month and the nominal inflation rate is lower. Assuming that this trend continues and extends to core inflation, it is likely that lower rate hikes will occur in November and December, which will finally give the markets greater confidence in the fact that the peak rates have been reached ».
Meanwhile, the ECB also makes it clear that it is preparing to raise. From the European Central Bank, hawk Isabel Schnabel this morning reiterated the need to continue raising the cost of money, stressing that the looming recession alone is not enough to cool prices.