Europe still ends up in the red on interest rate fears

Europe still ends up in the red on interest rate fears


THE EUROPEAN MARKET ENDS IN RED

by Claude Chendjou

PARIS (Reuters) – European stock markets closed lower on Monday and Wall Street was also trading in the red mid-session, on the prospect of a rapid and sustained rise in interest rates in both Europe and the United States. which would drive bond yields higher. and propelled the dollar to a new 20-year high.

In Paris, the CAC 40 ended down 0.83% at 6,222.28 points. The German Dax fell 0.61%.

The EuroStoxx 50 index fell 0.92%, the FTSEurofirst 300 0.87% and the Stoxx 600 0.81%.

In the UK, markets are closed on Mondays due to the “Summer Bank Holiday”.

After the sharp drop in stock markets this Friday in reaction to statements by Jerome Powell, president of the US Federal Reserve (Fed), who warned that the institution’s restrictive monetary policy would be maintained “for a certain time”, stocks continued its collapse on Monday, due to lack of a catalyst.

Inflation figures for the euro zone are not due out until Wednesday and the US jobs report on Friday.

Meanwhile, fears of a recession have marked the trend, especially since in Europe, several officials from the European Central Bank (ECB) such as Isabel Schnabel or François Villeroy de Galhau have spoken out over the weekend in favor of a sharp rise of the interests. in September, in the face of still very high inflation.

Consequently, in the money markets, on Monday the assumption of a rise in the cost of credit of 75 basis points in the euro zone as in the United States for the month of September was strongly reinforced.

At the same time, the volatility index jumped during the session in Europe to a maximum of six weeks and in the United States to a maximum of seven weeks around 27 points.

VALUES IN EUROPE

In Europe, most sectors closed in the red, with the most marked fall being that of the new technologies compartment, which lost 2.36% after a new fall in the Nasdaq in the United States.

In Paris, Capgemini fell 2.19%, while in Frankfurt, SAP fell 0.84%.

On the positive side, the Nantes Valneva laboratory advanced 0.39% after the announcement of the positive results of the tests of its vaccine against COVID-19.

Uniper, the premier German importer of Russian gas, paid 2.95%, the German Minister of the Economy declared that he would attend to the fact that the price of gas was good for the quicker refill than it provided for the reserves. From the country. Prices for gas contracts to be delivered in September fell more than 12% on Monday to 267 euros per megawatt hour.

ON WALL STREET

At the time of closing in Europe, the Dow Jones fell 0.26%, the Standard & Poor’s 500 0.32% and the Nasdaq 0.67%, indices still affected by statements by Jerome Powell.

“Investors are now convinced that the Fed really wants to curb inflation,” writes Rod von Lipsey, CEO of UBS Private Wealth Management, in a note, while the Swiss group’s wealth management subsidiary expects this market volatility persist until mid-2023.

Technological groups, sensitive to changes in interest rates, fell like Apple (-1.28%), Microsoft (-0.81%) or Tesla (-1.78%).

Dow and Lyondell Basell Industries returned 1.90% and 1.01% respectively after Keybanc downgraded to “underweight” the two chemical groups.

On the positive side, the energy sector (+2.12%) is in demand with the continued increase in oil prices.

CHANGES

Still supported by Jerome Powell’s words, the dollar appreciated 0.01% against other majors and hit a new 20-year high.

The euro, despite rising 0.37% to $0.9998, has failed to break par with the dollar, with the risk of recession in the euro zone being considered greater than in the United States.

SPEED

Bond yields in Europe ended strongly as expectations for an interest rate hike were revised higher.

The ten-year Bund, a benchmark in the euro zone, ended with a rise of about ten basis points to 1.5010%, after having taken more than 13 points in session to 1.532%, the highest in two months .

The two-year yield, the most sensitive to rate changes, gained 12.5 points to 1.092% at the close, but soared 18 points to 1.147% in the session, an all-time high since June 21.

At the close in Europe, the two-year US Treasury bill rate stood at 3.413% (+20 points) and the ten-year rate at 3.1098% (+7.5 points).

OIL

Oil prices are supported by fears of an OPEC+ production cut and renewed violence in Libya, two factors outweighing dollar strength and recession risk.

Brent rose 3.03% to $104.05 a barrel and US light crude (West Texas Intermediate, WTI) rose 3.3% to $96.13 a barrel.

(Written by Claude Chendjou, edited by Sophie Louet)

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