Traders work in London, Great Britain
by Claude Chendjou
PARIS (Archyde.com) – Wall Street is expected to fall and European stock markets are in the red mid-session on Wednesday, caught up in a renewed risk aversion linked to the prospect of another sharp rise in interest rates in the euro zone next month, the publication of economic indicators considered disappointing, the turbulence on the foreign exchange market and the evolution of the energy crisis.
Futures on New York indices signal an opening on Wall Street down 0.4% for the Dow Jones, 0.64% for the Standard & Poor’s 500 and 1.1% for the Nasdaq.
In Paris, the CAC 40 fell 1.28% to 5,680.07 around 11:50 GMT. In Frankfurt, the Dax lost 1.37% and in London, the FTSE dropped 0.7%.
The pan-European FTSEurofirst 300 index fell by 1.33%, the EuroStoxx 50 of the euro zone by 1.43% and the Stoxx 600 by 1.46%.
Several European Central Bank (ECB) officials said on Wednesday that the Frankfurt institute may have to raise interest rates by another 75 basis points at its October meeting and decide on another hike in December. to bring them to the “neutral” level, that which neither stimulates nor slows down the economy.
In terms of economic indicators, household confidence in France fell more sharply than expected in September according to INSEE, while the Gfk survey in Germany shows that consumer sentiment should fall further in October for the fourth consecutive month in due to high inflation and soaring energy costs.
Leaks on the Nord Stream 1 and 2 gas pipelines in the Baltic Sea, seen as possible acts of sabotage, are also fueling risk aversion, as Europe promises a “strong and united response” in the event of deliberate acts.
On the foreign exchange market, turbulence continues as the Bank of England (BoE) announced on Wednesday that it would buy as many British government bonds as needed by October 14 to stabilize the markets.
The International Monetary Fund (IMF) and the rating agency Moody’s have also openly criticized London’s new economic strategy, which has caused the pound sterling to fall and the cost of public debt to soar.
VALUES IN EUROPE
In Europe, the only sector in the green is that of health (+0.79%), a defensive compartment.
It is supported in particular by Sanofi which gains 1.5%, the laboratory having declared to foresee a positive exchange effect on its results for the third quarter. The Swiss group Roche, up 4.05%, benefited from favorable announcements from Biogen and Eisai on their experimental treatment for Alzheimer’s disease.
On the downside, sectors sensitive to economic conditions such as energy, basic resources, distribution and banks fell by 1.15%, 1.45%, 2.72% and 3.83% respectively. %.
The German group Commerzbank (-6.27%) also announced new provisions linked to its Polish subsidiary mBank.
RATE
Bond yields in Europe are volatile and erratic following Bank of England announcements. That of the ten-year German Bund, which fell in session to 2.19%, rose to 2.29%, while the two-year appears at 1.91%, yielding more than seven basis points.
The yield on ten-year US Treasury bonds also fell, by around one point, to 3.95%. The two-year-old gives up nearly nine points to 4.21%.
CHANGES
The dollar, up 0.49%, is trading at a new 20-year high against a basket of benchmark currencies, supported by its safe-haven status and expectations of rising credit costs. Wells Fargo analysts estimate that the US Federal Reserve (Fed) key rate should be between 4.75% and 5% before the end of the first quarter of 2023.
The euro is trading at 0.9562 dollars, down 0.31%, penalized by the latest developments in the gas crisis in Europe.
The pound sterling, which briefly erased its losses against the dollar after the BoE’s announcements, fell 1.55% to 1.057 dollars, very close to its historic low hit on Monday at 1.03 dollars.
OIL
Oil prices are broadly stable, with the risk of Hurricane Ian disrupting production in the Gulf of Mexico being offset by the strength of the dollar and rising crude inventories in the United States.
The barrel of Brent gained 0.08% to 86.34 dollars a barrel and American light crude (West Texas Intermediate, WTI) 0.27% to 78.71 dollars.
(Written by Claude Chendjou, edited by Jean-Stéphane Brosse)