After the second ECB rate cut last week, the Federal Reserve chose to start its monetary easing with a whopping 50 basis points on Wednesday. This boosted global stock markets, with the S&P 500 closing Thursday’s session higher for the eighth session out of the last nine, closing the session at an all-time high, while the Dow settled above the psychological level of 42,000 points, reaching a new record. Although markets then reversed today, Central banks were the driver of earnings in the eighth quarter.
Today’s session
Among the markets of the Old Continenta day under pressure for Frankfurt, which ended with a decrease of 1.49%, for London, with a clear disadvantage of 1.19%, for Paris, a decrease of 1.51%. Negative session also for Business Squarewith the FTSE MIB leaving 0.83% on the floor; along the same lines, the FTSE Italia All-Share lost 0.89%: the FTSE Italia Mid Cap was terrible (-1.61%); as well as a sharp decline in the FTSE Italia Star (-1.71%).
The sectors that weighed on the European stock markets were: Automotive (which is affected by the Mercedes-Benz slump after the downward revision of the year-end targets due to a less favourable than expected macro context and the weakening of Chinese demand) and Luxury (Jefferies said in a report on the sector that it does not see any appreciable improvement in the second half of the year after fragile demand in the first half.)
The choices of central banks
Wednesday, the Federal Reserve lowered interest rates by 50 points base in a range of 4.75% to 5%, beating analysts’ expectations for a 25 basis point cut, although market bets in recent days had been on a deeper cut. “I don’t think anybody should look at this and say, ‘Oh, this is the new pace,’” Fed Chair Jerome Powell said. “I think we’ll tread carefully meeting by meeting and make our decisions as we go along.”
Thursday the Norge Bank kept its key interest rate unchanged at 4.50%, a 16-year high, while the Bank of England left the benchmark interest rate at 5%, while also deciding to reduce the stock of purchases of UK government bonds held for monetary policy purposes
Friday, the Bank of Japan kept rates unchanged, but signaled further possible increases in the coming months. The move comes after a late-July hike that helped fuel volatility in Japanese assets in August.
The performance of oil and gold
Despite a weak final session, the petrolium closed the week with a broad increase, also supported by the Federal Reserve’s greater-than-expected rate cut and by fears of a worsening geopolitical situation between Israel and Hezbollah (with a series of attacks in Lebanon).
Yet another record for thegoldwhich broke through $2,600 an ounce, benefiting from the Federal Reserve’s interest rate cut, geopolitical tensions, heavy buying by central banks and, lately, inflows into ETFs.
