RISING IN SIGHT IN EUROPE, THE DOLLAR AND YIELDS DECREASE
PARIS (Reuters) – Major eurozone stock markets are expected to rise on Tuesday as the dollar loses some ground and bond yields fall, and markets as a whole start to calm after the shock caused by the latest statements by the president of the US Federal Reserve.
Index futures suggest a rise of 0.44% for the Paris CAC 40, 0.27% for the Frankfurt Dax and 0.34% for the EuroStoxx 50. In London, where markets remain closed on Monday Due to a holiday, the FTSE 100 was reported down 0.2%.
Wall Street trimmed losses in late trading on Monday after a sharp drop on Friday triggered by Fed Chairman Jerome Powell’s speech on the need for tight monetary policy for “a while” against inflation.
In Europe, investors should also pay attention to statements from European Central Bank (ECB) officials suggesting that the ECB could raise rates by three-quarters of a point next week, more than previously expected.
If the increase in the cost of credit continues to be the main concern of investors, their attention will focus in the short term on the monthly report on US employment that will be published on Friday and that should provide new elements on the evolution of the US economy.
In the immediate term, Tuesday’s session will be animated, among other things, by the first estimate of inflation in Germany at 12:00 GMT, then by the US consumer confidence index at 14:00 GMT.
ON WALL STREET
The New York Stock Exchange closed lower on Monday but above its lows for the session: the Dow Jones index fell 0.57%, or 184.41 points, to 32,098.99, the Standard & Poor’s 500 it lost 27.05 points, or 0.67%, to 4,030.61 and the Nasdaq Composite fell 124.04 points (-1.02%) to 12,017.67.
All three indices hit their lowest level in a month during the day, still under the influence of Jerome Powell’s comments on Friday.
Meanwhile, the CBOE volatility index reached its highest level in seven weeks.
Supporting the trend, the energy compartment gained 1.54% thanks to the strong rise in the oil market, driven by information about a possible reduction in production by OPEC + and by tensions in Libya. Exxon Mobil and Chevron gained 2.30% and 0.75% respectively.
Index futures so far suggest a 0.2% to 0.4% open.
On the Tokyo Stock Exchange, the Nikkei index ended up 1.14% thanks to the rebound in technology stocks such as Tokyo Electron (+1.65%).
In China, the trend is on the contrary downward after the new sanitary restrictions announced in several cities due to the increase in COVID-19 cases: the Shanghai SSE Composite yields 0.44% and the CSI 300 0.33 %.
“Despite the decline in the overall number of COVID cases, the COVID situation in China may well be getting worse,” Nomura analysts said in a note. “Markets could be hit again in the coming weeks, which could lead to another round of downgrades (in growth forecasts) by economists.”
The dollar fell against the other main currencies (-0.09%) after the maximum of 20 years registered on Monday, a drop that can be explained, among other things, by the renewed interest of currency traders in the euro motivated by speculation about the magnitude of the next rate hike by the European Central Bank (ECB).
The European single currency rose to $0.9999 (+0.04%) from $0.9912 at its lowest level on Monday.
US Treasury yields are falling in Asian trading after rising sharply in the last two sessions, with the two-year returning to 3.4089% after reaching its highest level since the end of 2007 at 3.489% and the ten-year yield drops three basic points to 3.0838%.
In the European market, the German 10-year bond also fell in early trading to 1.481% after hitting a two-month high of 1.515%.
The oil market is erasing some of its gains on Monday as the market now fears that upcoming interest rate hikes in industrialized countries will finally hit crude demand.
Brent fell 0.49% to $104.58 a barrel and US light crude (West Texas Intermediate, WTI) fell 0.03% to $96.98.
(Written by Marc Angrand)
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