EUROPEAN STOCK MARKETS END LOWER
by Claude Chendjou
PARIS (Archyde.com) – European stock markets ended sharply lower on Monday and Wall Street was also trading in the red mid-session amid risk aversion linked to fears over Russian gas supplies in Europe, concerns over inflation and the prospect of sustained monetary tightening despite the risks of a recession.
In Paris, the CAC 40 ended down 1.8% at 6,378.74 points. The British Footsie lost 0.22% and the German Dax 2.32%.
The EuroStoxx 50 index fell by 1.93% and the FTSEurofirst 300 by 0.86%. The Stoxx 600 fell 0.96% after hitting a session low since July 28.
The volatility index, seen as a barometer of fear, hit a nearly three-week high in the US at over 23 points and the EuroStoxx 50 volatility index jumped 11.34 % at 27.36 points.
Caution in the markets was fueled by Gazprom’s announcement to close for maintenance from August 31 to September 2 the Nord Stream 1 gas pipeline, which supplies Europe. On the Amsterdam Stock Exchange, the price of natural gas soared in session by more than 20% to a record level of 292.5 euros per megawatt hour before falling to 278 euros.
In this context of soaring energy costs, the Bundesbank estimated on Monday that the risk of a recession in Germany was increasingly likely and that inflation could peak at more than 10% this autumn.
Citi, for its part, anticipates inflation at 18% at the start of 2023 in the United Kingdom and thinks that the Bank of England (BoE) may have to raise its rates to 6%-7% to bring it down.
In the United States, where inflation and slowing growth are also concerns, the second GDP estimate is due on Thursday, while on Friday investors hoped that the speech of Jerome Powell, the chairman of the Reserve federal government (Fed), at the annual conference of central bankers in Jackson Hole, will provide a more precise idea of the future trajectory of rates.
A Archyde.com survey, published on Monday, shows that the Fed is likely to opt for a 50 point hike in rates in September, after having already raised the cost of credit by 225 points since March.
VALUES IN EUROPE
In Europe, the most significant falls were in the assets of cyclical compartments such as automotive (-3.67%), banks (-1.49%) and industry (-2.27%), while energy (+0.61%), basic resources (+0.38%) and the defensive sector of healthcare (+0.55%) posted the best gains.
Renault (-4.42%) and Stellantis (-4.02%) were among the strong declines on the CAC 40 alongside Société Générale and BNP Paribas which lost 3.02% and 2.48% respectively.
Elsewhere in Europe, Credit Suisse, which announced the appointment of a new chief financial officer, Dixit Joshi, and a new deputy director, Francesca McDonagh, lost 0.83%.
In the wake of Gazprom’s announcement, Uniper, the leading importer of Russian gas in Germany, fell by 7.72% and its parent company Fortum by 4.39%.
A WALL STREET
At the time of the close in Europe, the Dow Jones fell 1.32%, the Standard & Poor’s 500 1.54% and the Nasdaq 1.90%, pending Friday’s intervention by Jerome Powell then that investors fear a more restrictive policy from the Fed after statements by several officials of the institution to this effect.
“All eyes are on Jackson Hole,” sums up Craig Erlam, market analyst at OANDA, noting that this expectation is making the market nervous.
In values, new technology giants like Apple (-1.58%) and Tesla (-2.42%) are penalized by the continued rise in bond yields, while banks, like JPMorgan Chase (-1.61%) and Bank of America (-2.11%), are suffering from concerns about economic growth.
Cinema operator AMC Entertainment fell 36.58% after competitor Cineworld announced the possibility of filing for bankruptcy. Ford, down 4.65%, suffered from an unfavorable court decision after a fatal accident involving an F-250 pickup in Georgia in 2014. The automaker also announced the loss of 3,000 jobs in North America. North and India.
In mergers and acquisitions, the health group Signify Health jumped nearly 32.97%, the Bloomberg agency having reported that Amazon (-2.90%) and other companies were candidates for its takeover.
CHANGES
The euro, affected in particular by the gas crisis, is trading at 0.9934 dollars (-1%), after hitting a historic low at 0.9929.
The dollar, up 0.84% against a basket of international benchmark currencies, moves to a six-week high on the prospect of a larger interest rate hike in the United States and a risk deepest recession in Europe.
RATE
Bond yields continued to rise with that of the ten-year German Bund which took more than six basis points to 1.293% after gaining almost 15 points on Friday.
In the United States, the ten-year Treasuries yield rose 3.5 points to 3.025%, crossing the 3% mark for the first time since July 21, while the two-year yield rose 5.7 points to 3.324%. This inversion of the curves is the sign of an anticipation of a recession over a two-year horizon.
OIL
Affected by fears of a drop in demand, the oil market is back in the red after three sessions of increases in a row.
Brent fell 1.08% to 95.68 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.94% to 89.92 dollars.
TO FOLLOW TUESDAY:
The S&P Global PMI indices “flash” for the month of August in Europe.
(Written by Claude Chendjou, edited by Laetitia Volga)