(Paris) World stock markets fell and US bond rates rose after the harsh tone used by Jerome Powell, the chairman of the US Federal Reserve (Fed), before the US Senate where he was heard on Tuesday.
After a stable opening, Wall Street sank into the red. Around 12 p.m. EST, the Dow Jones fell 1.19%, the S&P 500 1.12% and the NASDAQ 0.78%.
European stock markets also tumbled into the negative. After the close, Paris lost 0.46%, Frankfurt 0.60%, Milan 0.67% and London 0.13%.
“The latest economic data is stronger than expected, suggesting that the final level of policy rates is likely to be higher than expected,” Jerome Powell said.
In other words, the economy remains overheated and the main Fed rate could continue to rise above 5.1%, the level at which Fed officials saw it stopping, according to their latest forecasts, which had were published in December.
Alexandre Baradez, analyst at IG France, considers these statements “quite logical given the content of the figures published in recent weeks and the persistence of inflation, particularly in services”.
The Fed Chairman also warned that rates could stay high “for a while.”
On the bond market, the rate of the American two-year debt approached very close to 5% (4.96% around 11:55 a.m. Eastern time), the highest since 2007.
The ten-year borrowing rate in the United States was stable and those of European states fell slightly from their peaks reached on Monday.
The currency market also reacted strongly: the dollar climbed 1.02% against the euro to 0.9457 euro for a dollar, and 1.43% against the pound to 0.8436 pound for a greenback, the highest since early January.
Alexandre Baradez notes, however, that the market was not taken “in panic” even if the words of Jerome Powell are obviously “unpleasant to hear”.
The next meeting of the Fed’s monetary policy committee is scheduled for March 21-22.
On the raw materials side
Oil prices fell on the prospect of further interest rate hikes which could negatively affect global economic growth.
Around 11:55 a.m. (Eastern time), a barrel of Brent from the North Sea for delivery in May lost 2.83%, to 83.74 dollars.
The barrel of American West Texas Intermediate (WTI), for delivery in April, yielded 2.82%, to 78.17 dollars.
Oil and mining stocks also fell as a result.
TotalEnergies lost 0.51% in Paris, BP 0.16% and Shell 0.06% in London.
Anglo American lost 2.75%, Glencore 4.58%, Antofagasta 2.90% in London. In Paris, ArcelorMittal fell by 1.84% and Eramet by 4.45%.
The largest German real estate group Vonovia was raided Tuesday at its headquarters, the police investigating suspicions of corruption, breach of trust and fraud, reported the German press, which also reports the arrest of four people. The group is said to have entered into anti-competitive agreements during tenders in order to award a contract to a specific company. The title lost 5.63% in Frankfurt.
Aston Martin starts with a bang
Briton Aston Martin climbed 7.57% in London, his title having been boosted for several days by results deemed solid and a brilliant start to the season in Formula 1, with the third place of his Spanish driver Fernando Alonso Sunday at the GP of Bahrain.
Electric pickup truck maker Rivian, struggling to ramp up production, fell 12% after announcing plans to put $1.3 billion worth of bonds on the market.