EUROPEAN STOCK EXCHANGES EXPECTED TO FALL
by Marc Angrand
PARIS (Archyde.com) – The main European stock markets are expected to fall on Tuesday on the back of a further upward push in bond yields ahead of the Federal Reserve’s monetary policy meeting.
Index futures suggest a drop of 0.26% for the CAC 40 in Paris, 0.33% for the Dax in Frankfurt, 0.23% for the FTSE 100 in London and 0.47% for the EuroStoxx 50.
Yields on US government bonds are sharply higher in Asian markets a week before the Fed’s monetary policy meeting, with some investors not ruling out that the US central bank will further accelerate the reduction of its securities purchases on the markets before starting to raise its rates in March.
“It seems possible that the Fed may want to act a bit more aggressively early in the tightening cycle,” DBS Bank rates strategist Eugene Leow said in a note. “That could translate into a permanent end to quantitative easing in January instead of waiting until March.”
The yield on two-year Treasury bills, the most sensitive to changes in market expectations in terms of key rates, exceeded 1% for the first time since February 2020. The ten-year return rose to 1.84 %, up seven basis points from its level on Friday.
For its part, the Bank of Japan revised its inflation forecast slightly upwards while reaffirming its intention to maintain an ultra-accommodating policy.
At the same time, the rise in oil prices continues, fueled by geopolitical events, which risks fueling concerns about inflation.
The upcoming session will be driven by, among other things, the ZEW index of investor sentiment in Germany and quarterly results from Goldman Sachs, four days after those of JP Morgan Chase and Citigroup.
VALUES TO FOLLOW:
A WALL STREET
After the extended Martin Luther King Jr Day weekend, futures on major US indices so far point to an opening down 0.3% for the Dow Jones, 0.49% for the Standard & Poor’s 500 and 0.92% for the Nasdaq.
On Friday, the Dow Jones had been hampered by the financial sector after the disappointing publications of several major banks, but the Standard & Poor’s 500 and the Nasdaq had ended in the green.
The Dow was down 0.56%, or 201.81 points, at 35,911.81, the S&P-500 was down 3.82 points, or 0.08%, at 4,662.85 and the Nasdaq Composite gained 86.94. points (+0.59%) to 14,893.75.
Over the past week, the Dow lost 0.9% and the S&P-500 and the Nasdaq both lost 0.3%.
IN ASIA
On the Tokyo Stock Exchange, the Nikkei index lost 0.27% as the rise in US bond yields and the prospect of a Wall Street pullback prompted investors to be cautious, resulting in a move sale on large caps.
In China, the Shanghai SSE Composite ended up 0.8% and the CSI 300 gained 0.97% the day after the People’s Bank of China unexpectedly lowered its medium-term loan rate. a support measure that benefits the real estate and infrastructure sectors, among others.
The CSI real estate index thus gained 4.08%.
EXCHANGES/RATES
The dollar is gaining some ground against the euro, which is back around 1.14 but is appreciating against the yen, the Japanese currency being penalized both by the rise in US bond yields and the latest announcements from the Bank from Japan.
The “dollar index”, which follows the fluctuations of the greenback against a basket of reference currencies, appreciated by 0.06%.
On the European bond market, the ten-year German Bund yield is once again approaching zero: at -0.012% a few minutes after the start of trading, it is moving to its highest since May 2019.
OIL
The oil market is once again on the rise, and at its highest in more than seven years for Brent, after the attack attributed to the Yemeni Houthi rebels targeting the United Arab Emirates on Monday, which raised fears of a temporary drop in supply world.
Brent gained 1.4% to 87.69 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.81% to 85.34 dollars.
Brent rose to $87.88, its highest level since October 2014, and WTI to 85.50, a three-month high.
(With Tom Westbroo in Sydney, editing by Blandine Hénault)
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