Paris (AFP)
European markets were losing ground on Wednesday before the planned opening of Wall Street in decline, despite the surprise cut in rates by the Bank of England and still awaiting details of the plan to support the US economy.
Around 12:00 GMT, the European stock markets abandoned part of the morning gains: Paris only increased by 0.99%, Frankfurt by 0.38%, London by 0.21% and Madrid by 0.11%. The decline in Milan (-0.34%) perhaps heralded a new trend reversal.
The Bank of England (BoE) had earlier announced a surprise 50 basis point cut in its rates from 0.75% to 0.25%, and its governor assured that his institution was ready to "take all other measures needed "to help the UK economy with the" shock "of the coronavirus epidemic.
European markets saw this as a good sign before the long-awaited monetary meeting of the European Central Bank (ECB) on Thursday, which they hope will take an arsenal of measures against the threats of the coronavirus epidemic to the economy.
The extent of this drop in rates is the largest since early 2009, at the height of the international financial crisis. Rates are returning to their historic low, a level already reached in the months following the Brexit vote.
"If the goal was to push the European stock markets up at the opening," the plan worked, said Michael Hewson, analyst for CMC Markets.
"However, for the rate cut to be effective, it must be based on a budgetary response from the Minister of Finance later today (when the budget is presented by the British government, note), otherwise the morning's progress will not last. "
Investors are expecting a coordinated response from the various authorities to calm the very nervous stock markets.
On Tuesday, the EU got into battle order by announcing, among other measures, the setting up of a European fund of 25 billion euros intended for health systems, small businesses, labor market and " vulnerable sectors of our economy ", according to the head of the European executive Ursula von der Leyen, eager to ease the budgetary constraint usually weighing on states.
- The end of zero deficit in Germany -
The message was heard by Germany, whose chancellor announced Wednesday that she could reverse the sacrosanct rule of zero public deficit. Rome also announced Tuesday an envelope of 25 billion euros to fight the epidemic.
Far from this invigorated European context, Wall Street should open in retreat.
"The US markets reacted to the morning rebound in Europe by going up a little but the Dow Jones and the S&P 500 should open lower," added Mr. Hewson, the day after a US session in the green above all for technical reasons. The United States "in fact increasingly doubts the government's real will to act quickly" to repel the epidemic.
"A rebound remains possible in the very short term but the sinews of war is the containment of the spread of the coronavirus epidemic," said Tangi Le Liboux, strategist at Aurel BGC.
"If the number of cases continues to increase rapidly in the coming days in Europe and the United States, the markets will fear the implementation of containment measures as strict as those implemented in Italy, at the risk of suffocation of the economy, "he added.
Oil prices, which rebounded sharply on Tuesday after their crash the previous day, started to fall sharply due to signs of an intensification of the price war between Saudi Arabia and Russia, the source of the classes collapse on Monday.
While the Saudi oil giant Saudi Aramco and the UAE public company announced their intention to each increase their production by one million barrels per day, the barrel of American crude WTI dropped 4.6% to 33.28 dollars and the a barrel of Brent from the North Sea lost 4.1% to 35.94 dollars around 11:30 GMT.
The euro was also rising against the greenback, at the rate of one euro for 1.1323 dollars around 11.30 GMT against 1.1292 dollars Tuesday at 19.00 GMT. The pound, supported by BoE announcements, also appreciated against the greenback at the rate of one pound for 1.2933 dollars against 1.2911 the day before.
© 2020 AFP