EQUITIES RETURN UP AHEAD OF THE ECB AND THE FED
by Claude Chendjou
PARIS (Archyde.com) – Wall Street is expected to rise on Wednesday before the announcements of the American Federal Reserve (Fed) and the European stock markets evolve in the green at mid-session, carried by banking stocks, while the European Central Bank (ECB ) called an emergency meeting to discuss the recent sell-off in European government bonds. Futures on New York indices signal an opening on Wall Street up 0.46% for the Dow Jones, 0.82% for the Standard & Poor’s 500 and 1.05% for the Nasdaq. In Paris, the CAC 40 gained 1.04% to 6,011.43 around 11:45 GMT. In Frankfurt, the Dax takes 1.18% and in London, the FTSE advances 1.32%.
The pan-European FTSEurofirst 300 index rose by 1.18%, the EuroStoxx 50 of the euro zone by 1.27% and the Stoxx 600 by 1.17%.
The ECB has decided to urgently convene its Governing Council because the evolution of borrowing costs in the currency bloc has recently been marked by a pronounced divergence between those of Germany, considered to be the safest issuer in the region, and those of heavily indebted countries, such as Italy, fueling the specter of regional fragmentation.
The yield spread (“spread”) between the ten-year German Bund and that of its Italian equivalent thus reached 252.9 basis points on Tuesday, its highest level since April 2020. On Wednesday, this spread returned to around 230 points even before the end of the ECB meeting.
“It is clear that the market is anticipating some kind of intervention,” said Teeuwe Mevissen, senior strategist at Rabobank, while Christine Lagarde, the president of the ECB, assured last week that the institution would deploy a new instrument to avoid any fragmentation.
According to sources directly informed of the matter, a press release from the ECB should be published in the early afternoon following its meeting which started at 9:00 GMT.
In the United States, monetary policy decisions from the Fed are also expected at 6:00 p.m. GMT after a two-day meeting, while the institution’s president, Jerome Powell, is due to speak half a day. hour later.
Since Friday’s release of consumer prices in the United States, which showed higher than expected inflation, markets now estimate at 99.7% the probability of a Fed rate hike of 75 points. this Wednesday, according to CME Group’s Fedwatch barometer.
As for the economic statistics of the day, the economic institute Ifo announced on Wednesday that it is now counting on growth in Germany’s gross domestic product (GDP) this year of 2.5% against a forecast in March of 3.1%, while inflation is expected at 6.8% and no longer 5.1%.
In the eurozone, the trade deficit almost doubled in April to 32.4 billion euros and growth in industrial production slowed more than expected over the same period to 0.4%.
WALL STREET VALUES TO FOLLOW
Qualcomm gains 0.6% in pre-market after the European Union court annulled the fine of 997 million imposed on it by the European Commission four years ago for having ensured the exclusive Apple chip supply.
VALUES IN EUROPE
On the pan-European Stoxx 600, apart from energy (-0.4%), all the major compartments are in the green with finance (+1.8%) in the lead. The banks sub-compartment, which has recently suffered from the massive sales of Italian bonds, rebounded 3.1%.
In Rome, Unicredit, Intesa Sanpaolo and BPER Banca advance from 4.6% to 6%, while in Paris, Société Générale, BNP Paribas and Crédit Agricole win between 3% and 3.5%.
Excluding finance, H&M, which on Wednesday published higher-than-expected sales in the second quarter, lost 4.1%, as investors were worried about the group’s margin and the level of sales which remained lower than before. the COVID-19 pandemic. Its competitor Inditex yields 0.1%.
The Swiss chemical group Clariant, up 2.2%, is however driven by a 30% jump in its turnover in the first quarter.
RATES Bond yields in the euro zone have fallen sharply since the announcement of the ECB meeting.
That of ten-year Italian bonds, which peaked since 2013 at 4.305%, fell 27.6 basis points to 3.942% and is heading for its biggest single-session drop since March 1.
Its German equivalent of the same maturity dropped six basis points to 1.669%.
The French OAT rate lost 11 points to 2.262%.
In the United States, the yield of US ten-year Treasuries fell 11 points to 3.3715% after hitting its highest level since April 2011 at 3.498% on Tuesday.
CHANGES
On the foreign exchange market, the euro, up 0.61%, at 1.0478 dollars, benefits from the announcement of the extraordinary meeting of the ECB, but remains vulnerable against the dollar, pending decisions of the US Central Bank.
“We have some relief on the euro this morning due to the ECB, but other than that the dollar remains firm,” said Nordea analyst Niels Christensen. “We anticipate a more restrictive monetary policy in the eurozone but even more restrictive in the United States and this will be an important factor for the dollar against the euro,” he added.
The index measuring the fluctuations of the dollar against a basket of reference currencies lost 0.69% after having posted the highest level since December 2002 the day before.
OIL
Oil prices are receding as concerns over economic conditions and demand outweigh supply tensions ahead of Fed interest rate decisions.
The barrel of Brent fell 0.57% to 120.48 dollars and that of American light crude (West Texas Intermediate, WTI) lost 0.61% to 118.19 dollars.
(Edited by Claude Chendjou, edited by Kate Entringer)