The Paris Bourse is heading for a fourth session of declines on Thursday, following in the footsteps of Wall Street and Asian markets in a market climate clouded by the Fed's unaccommodating tone.

At around 8:15 a.m., the 'future' contract on the CAC 40 index - July delivery - lost 53.5 points to 7223.5, heralding a start to the session in negative territory.

Wall Street had already suffered on Wednesday, as investors feared that Federal Reserve Chairman Jerome Powell's stated intention to continue monetary tightening in the USA could herald an imminent recession.

Concerns within the Federal Reserve about the persistence of inflation seem to have particularly deterred investors from taking risks.

At the final bell, the Dow Jones was down 0.3% and the Nasdaq Composite was down around 1.2%.

"There has been a rotation away from the 'FANMAGs' (Facebook, Apple, Netflix, Microsoft, Amazon and Google) and towards value sectors such as energy and industrials", commented one trader.

Futures contracts currently point to a Wall Street opening
down by around 0.2%, but the trend could change with the publication, an hour before the opening, of weekly unemployment figures.

The session will also be marked by the release, in the US, of old home sales, Conference Board leading indicators and weekly oil inventories.

Reaction to Jerome Powell's comments was equally negative in Asia, where the Tokyo Stock Exchange's Nikkei index gave up 0.8% on Thursday.

In the UK, the Bank of England's (BoE) monetary policy statement is scheduled for lunchtime, and markets are banking on a further tightening of rates.

"The country remains (...) confronted with persistent inflation which continues to fuel wage growth", explains Bill Papadakis, strategist at Lombard Odier.

In this context, the Bank of England has not yet completed its monetary tightening cycle, and no signs of policy easing are expected before mid-2024", he adds.

The repercussions of Powell's statements remain limited in the bond compartment, where the yield on 10-year Treasuries is down to 3.72% and that on the Bund of the same maturity, the benchmark rate for the euro zone, is down to 2.43%.

On the currency front, the Fed chairman's rather hawkish tone failed to revive the dollar, with the euro climbing back above 1.0980 and seemingly heading straight for its annual ceiling of 1.1050.

Fears for the economy, on the other hand, penalized the two
benchmark crude oil contracts, which each lost around 0.5%, to $72.2 a barrel for Brent and $76.7 for WTI US light crude.

At this stage of the week, the CAC 40 index is heading for a decline of around 1.7%.

The chartists at Kiplink Finance warn that further consolidation below the intermediate support of 7260 points would place the index in a more fragile position, even if it is still a long way from a trend reversal, expected around the main reversal support at 7150 points.

Copyright (c) 2023 CercleFinance.com. All rights reserved.