No respite for equities, all-time low for the pound – 09/26/2022 at 08:47

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File photo of the offices of the London Stock Exchange Group

PARIS (Archyde.com) – The main stock markets in the euro zone are expected to fall on Monday, as does Wall Street, the economic and political environment continuing to discourage risk taking as the pound sterling continues to fall on the foreign exchange market.

Index futures suggest a drop of 0.64% for the CAC 40 in Paris, 0.71% for the Dax in Frankfurt and 0.6% for the EuroStoxx 50. In London, the FTSE 100 very heavily weighted in export-oriented large stocks, could gain 0.64%.

The Paris market lost 4.84% last week to end Friday at its lowest level since mid-July, and the European Stoxx 600 index, down 4.37% in five sessions, fell back to its level of December 2020 after the multiple key rate hikes and the new signs of deterioration in the economic situation.

On the agenda for the week that is beginning are many meetings likely to fuel the nervousness of investors, between the OECD forecasts on Monday, numerous public interventions by central bank leaders and a new series of indicators. economies, from inflation in the euro zone to household spending in the United States.

Added to this are questions about Italy after the victory on Sunday of the right-wing coalition led by Giorgia Meloni, and especially the destabilization of the pound sterling.

CHANGES

The British currency indeed fell to its lowest level against the dollar, yielding up to 5%, to 1.0327, in weak exchanges in Asia, before reducing its decline to 2.06%, to 1 ,0639.

This uninterrupted fall fuels speculation about a possible intervention by the Bank of England (BoE), to try to counter the impact on investor confidence of the massive tax cuts announced Friday by the government of Liz Truss, in which many investors see above all a danger for British public finances.

“The BoE is going to have to take action today for sure, which will lead to a massive hike in interest rates to try to stabilize the sterling,” said Michael Every, strategist at Rabobank in Singapore. “The market is now treating the UK as if it were an emerging market.”

The euro hit a new 20-year low against the greenback at 0.9569, as Italian legislative results added to fears of recession. It is now trading at 0.9649, down 0.42%.

The dollar index gained 0.54%.

A WALL STREET

Futures on major US indices suggest an opening down 0.68% for the Dow Jones, 0.9% for the Standard & Poor’s 500 and 0.96% for the Nasdaq.

On Friday, between fears of recession and rising rates, the Dow Jones ended down 1.62%, or 486.27 points, at 29,590.41, the S&P-500 lost 64.76 points, or 1, 72%, to 3,693.23 and the Nasdaq Composite fell 198.88 points (-1.80%) to 10,867.93.

The week ended with a drop of 4% for the Dow, 4.65% for the S&P 500 and 5.07% for the Nasdaq.

IN ASIA

At the Tokyo Stock Exchange, the Nikkei index ended down 2.66%, its third consecutive decline, after a three-day weekend. He briefly broke the support of 26,500 points in the session for the first time since July 14th.

The session was marked among other things by the fall of Mazda (-5.56%) after press reports mentioning the cessation of its production in Russia.

In China, the trend is benefiting from the announcement of an easing of health restrictions in Macao: if the SSE Composite of Shanghai yields 0.55%, the broader CSI 300 gains 0.07%.

RATE

Bond yields continue to rise, in Europe as in the United States: in the euro zone, the ten-year German takes almost six points in the first exchanges to 2.101% and the two-year five points to 1.967%.

The rise is comparable for Treasury bond yields, at 3.7628% for ten-year securities and 4.2974% for two-year bonds, the highest for 15 years.

The yield spread between Germany and Italy is currently almost stable at 229 basis points.

OIL

The uncontested supremacy of the dollar on the foreign exchange market continues to penalize oil, already handicapped by the prospect of a fall in world demand.

Brent, at its lowest in eight months, dropped 1.33% to 85.00 dollars a barrel and American light crude (West Texas Intermediate, WTI) 1.27% to 77.74 dollars.

(Writing by Marc Angrand, with Tom Westbrook in Sydney, editing by Kate Entringer)

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