RISE IN VIEW IN EUROPE AFTER A RATE DROP IN CHINA
PARIS (Reuters) – The main European stock markets are expected to rise sharply on Friday in the wake of the major Asian markets after the announcement by the People’s Bank of China (PBC) of a marked drop in one of its main key rates, a new stimulus for the world’s second largest economy.
Futures contracts on indices suggest an increase of 0.77% for the CAC 40 in Paris, 1.03% for the Dax in Frankfurt, 1.13% for the FTSE 100 in London and 1.05% for the EuroStoxx 50.
The BPC lowered by 15 basis points, to 4.45%, its prime five-year loan rate, which serves as a benchmark for the Chinese mortgage market. It is its biggest cut since the overhaul of the central bank’s interest rate system in 2019, when economists expected a cut of just five to ten points.
“While this will certainly not be enough to counter all the headwinds that are holding back growth in the second quarter, it is a step in the right direction and the markets are reacting by anticipating perhaps further easing to come,” comments Carlos Casanova. , UBP’s senior Asia economist in Hong Kong.
The news so far takes precedence over concerns over global inflation, tighter monetary policies in both the US and Europe and the risk of recession in the US that have dominated market sentiment in recent days. .
The CAC 40 lost 1.41% over the first four sessions of the week and the broad European Stoxx 600 index 1.27%. Above all, the American Standard & Poor’s 500 fell 3.06% and is heading for its seventh consecutive week of decline. It is down 18% from its January 3 closing record.
Producer price figures in Germany published in the early morning could revive the debate on inflation and the scale of the rate hikes to come: at 1.4%, their rise was twice as marked as expected in April and brings their growth to 33.5% over one year, a record.
IN WALL STREET
The New York Stock Exchange ended lower on Thursday but above its daily lows after a rollercoaster session marked by the fall of Cisco Systems after the downgrade of its forecast, which added to concerns linked to inflation and rising interest rates.
The Dow Jones index fell 0.75% to 31,253.13 points, the Standard & Poor’s lost 0.58% to 3,900.79 and the Nasdaq Composite fell 0.26% to 11,388.50.
Cisco plunged 13.7% after lowering its full-year revenue growth forecast, which it attributed to the impact of its Russian exit and component shortages due to COVID-19 containment measures. 19 in China.
After the close, the equipment specialist for the semiconductor sector Applied Materials yielded 1.7%, its forecast for the current quarter being lower than Wall Street expectations.
Index futures so far suggest a rebound of around 0.6% for the Dow and 1.1% for the Nasdaq.
On the Tokyo Stock Exchange, the Nikkei index ended up 1.27%, benefiting from cheap purchases by investors who are betting on improving corporate results, thanks among other things to currency effects. It thus gained 1.18% over the whole week.
In China, the SSE Composite of Shanghai takes 1.3% and the CSI 300 1.68% after the decision of the People’s Bank of China, which also supports the Hang Seng in Hong Kong (+2.22%).
The dollar is up against the other major currencies (+0.11%) but this rebound should not prevent it from recording its first negative weekly performance since the beginning of April since it is currently down by one just over 1.5% over the week, after a 10% jump since mid-January.
The euro fell very slightly to $1.0585 but is heading for an increase of around 1.5% over the week.
The yield on ten-year US Treasuries was stable at 2.8623% but the two-year rose slightly to 2.6327%,
They had both fallen on Thursday, fears of a rapid deterioration in the economic situation in the United States having called into question in the eyes of some investors the scenario of accelerated tightening of monetary policy by the Federal Reserve.
The ten-year had thus returned to 2.772%, the lowest since the end of April, 43 basis points below its peak of last week.
In Europe, the ten-year German takes more than four basis points in the first exchanges to 0.989%.
The risk of a marked slowdown in global growth which would curb oil demand weighs on the price of a barrel: Brent drops 0.23% to 111.78 dollars a barrel and American light crude (West Texas Intermediate, WTI) 1 .21% to $110.85.
(Written by Marc Angrand, with Andrew Galbraith in Shanghai)