Shares neglected, rates rise, currency turbulence – 09/26/2022 at 15:01

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The French flag at the top of the Palais Brogniard, former Paris Stock Exchange

by Claude Chendjou

PARIS (Archyde.com) – Wall Street is expected to fall on Monday and European stock markets are trading in the red at mid-session in a context of risk aversion still linked to the rapid rise in interest rates and an acceleration of the deterioration of the economic situation, two factors to which are now added turbulence on the foreign exchange market.

Futures on New York indices signal an opening on Wall Street down 0.69% for the Dow Jones, 0.74% for the Standard & Poor’s 500 and 0.59% for the Nasdaq.

In Paris, the CAC 40 lost 0.16% to 5,774.31 around 12:20 GMT. In Frankfurt, the Dax dropped 0.1% and in London, the FTSE fell 0.74%. The Milan Stock Exchange, on the other hand, takes 0.49% the day after the early legislative elections, won by the alliance of the rights led by Giorgia Meloni.

The pan-European FTSEurofirst 300 index fell by 0.43%, the EuroStoxx 50 in the euro zone by 0.05% and the Stoxx 600 by 0.51%.

The pound sterling, which touched in session 1.0327 dollar, its lowest level since the passage of the United Kingdom to the decimal system at the beginning of the 1970s, feeds the speculations on a possible emergency intervention of the Bank of England ( BoE).

“The market is now treating the UK as if it were an emerging market,” said Michael Every, strategist at Rabobank, who does not rule out BoE intervention.

In Japan, Finance Minister Shunichi Suzuki said on Monday that his country was ready to react again to movements in currency speculation as Japanese authorities intervened last week in the foreign exchange market to support the yen against to the dollar.

The euro, for its part, fell in session to a low of 0.9569 dollars, a new low in twenty years against the American currency, while the dollar advanced by 0.34% against a basket of reference currencies.

In addition to the turmoil on the exchanges, the forecasts that the OECD underlines on Monday a risk of recession in the developed economies due in particular to the war led by Russia in Ukraine, inflation and the energy crisis.

In Germany, the monthly survey by the Ifo institute showed that the business climate in Germany had deteriorated more than expected in September and that the risk of recession was increasingly clear.

In addition, the public interventions expected from the heads of the major central banks hardly encourage risk-taking, as they raised their interest rates last week, in an almost synchronized manner, to curb high inflation.

VALUES IN EUROPE

On the pan-European Stoxx 600, the technology compartment (+1.27%) is in the lead, supported by cheap purchases of stocks such as STMicroelectronics (+0.77%) and Dassault Systèmes (+0.56%).

On the other hand, the real estate sector (-2.4%) shows the strongest drop in the prospect of further increases in interest rates which could reduce the borrowing capacity of consumers.

The commodity compartment, down 1.56%, and that of oil and gas, down 1.69%, are suffering from the strength of the dollar and fears of a drop in demand.

The oil companies TotalEnergies, BP and Shell lost 0.25%, 2.07% and 2.03% respectively.

The mining groups Anglo American, Glencore and Rio Tinto yielded 2.92%, 1.58% and 1.09% respectively in London, while in Paris ArcelorMittal fell by 0.26%.

RATE

Bond yields continue to rise: the ten-year German takes more than seven points to 2.114% and the two-year more than 11 points to 2.017%.

In the United States, ten-year and two-year Treasuries yields are trading respectively at 3.7808% and 4.2671%, an increase of around eight points each.

OIL

Oil prices, which have fallen to a nine-month low, are being penalized both by the sustained appreciation of the dollar and fears of a drop in global demand.

Brent, which fell in session to its lowest since January 14, dropped 1.28% to 85.05 dollars a barrel.

American light crude (West Texas Intermediate, WTI), which fell in session to a low since January 6, fell 1.24% to 77.76 dollars.

(Edited by Claude Chendjou, edited by Kate Entringer)

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