European equities open slightly lower after Fed’s meeting – Market Overview

European equities open slightly lower after Fed’s meeting – Market Overview

Stock markets in Europe lost some ground, although volatility remained at low levels after yesterday's Fed meeting concluded with a more hawkish bias in forward guidance.

Chairman Powell tried to downplay the forward guidance due to the uncertainty regarding the evolution of economic growth and inflation. Additionally, he said there was no rush to start the tapering process, which finally caused a certain movement back and forth, especially in stocks markets. These have somewhat recovered, but the Treasury bond yields ended up rebounding +8 bp to 1.58%. However, the most significant movement occurred with the U.S. Dollar, which rose more than 1% against the euro.

EUR/USD fell today to the 1.1950 support area. Should it close below this level, it would open the way to the 1.1850 area.

For the most hawkish part, the dot plot shows higher expectations of rate hikes than anticipated, with two increases (+50 bp) by the end of 2023 compared to none or one that discounted the market. While in the March meeting, only 7 of the 18 Fed members expected at least a 25 bp rise, now there are 13 (11 even expecting two rises). Seven of them expect the first rise to occur in 2022 (vs 4 in March).

Among the most dovish members are Fed’s president and vice president. The latter tried during his appearance to lower the hawkish tone but without success. This might be due to the currency market, where the general feeling is that the Fed has reversed its bias following the recent release of inflation figures, showing significant hikes.

Also, the economic projections released during yesterday's meeting showed a significant improvement over the previous ones. Progress in the labour market and job creation stand out, making chairman Powell say they could lead to an unprecedented improvement over the coming summer months.

Faced with this scenario, the markets recorded a rebound in the Treasury Bond Yields up to 1.60% in the 10-year benchmark, and consequently a rise in the Dollar. In the case of USD/JPY, a pair highly correlated with the yields of American bonds, it surpassed the barrier of 110.30. Technically, it should not find any obstacle until the 110.95 zone, the next reference level.

Sources: Bloomberg, reuters.com.

Le informazioni contenute nel presente documento sono redatte da Miguel A. Rodriguez e non costituiscono né devono essere interpretate come suggerimenti di investimento. Le informazioni di cui al presente documento costituiscono comunicazioni di marketing generali a scopo informativo e, in quanto tali, non sono state preparate nel rispetto dei requisiti di legge che promuovono le ricerche di investimento indipendenti. Inoltre, non sono soggette ad alcuna limitazione sulle transazioni condotte in anticipo rispetto alla divulgazione delle ricerche di investimento in questione.

Gli utenti / lettori non dovrebbero fare affidamento esclusivamente sulle informazioni qui presentate e dovrebbero fare le proprie ricerche / analisi anche leggendo la ricerca reale sottostante.

Key Way Investments Ltd non influenza né ha alcun input nella formulazione delle informazioni qui contenute. Il contenuto è generico e non tiene conto di circostanze personali individuali, esperienza di investimento o situazione finanziaria attuale.

Pertanto, Key Way Investments Ltd non accetta alcuna responsabilità per eventuali perdite di trader a causa dell'uso e del contenuto delle informazioni presentate nel presente documento. Le performance passate non sono un indicatore affidabile dei risultati futuri.