by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to rise on Tuesday and European stocks are trading in the green mid-session, risk appetite being fueled mainly by bargain buying after a 17-month low in the indices hit the last week in a context of accelerated monetary tightening by central banks in the face of galloping inflation. Futures on New York indices signal an opening of Wall Street up 1.3% for the Dow Jones, 1.4% for the Standard & Poor’s 500 and 1.3% for the Nasdaq.
In Paris, the CAC 40 advanced by 0.88% to 5,972.08 around 12:00 GMT. In Frankfurt, the Dax takes 0.34% and in London, the FTSE 0.55%.
The pan-European FTSEurofirst 300 index gained 0.5%, the Eurozone EuroStoxx 50 0.53% and the Stoxx 600 0.42%.
The positive trend in the equity markets is driven by cyclical sectors such as raw materials, chemicals and construction, while energy benefits from a new surge in oil prices.
However, the rebound remains fragile, with fears linked to the rise in interest rates and its impact on the economic situation still present.
“I think it’s a pause in a (bearish) trend with this increasing likelihood of slowing growth, high inflation – potentially stagflation,” said Timothy Graf, macroeconomic strategist at State Street.
Regarding inflation, the President of the European Central Bank, Christine Lagarde, on Monday reaffirmed the institution’s desire to fight against rising prices and its chief economist, Philip Lane, warned of a phenomenon that could lead consumers and businesses to modify their spending habits in response to expectations of higher prices.
Olli Rehn, one of the members of the Governing Council of the ECB, for his part indicated on Tuesday that a rate hike of a quarter of a point in July was definitively acquired but that the scale of the increase planned for September was yet to be determined, adding that inflation warrants a rapid normalization of the institution’s policy.
The German industry employers’ federation BDI on Tuesday lowered its forecast for the country’s economy to grow this year to 1.5% from 3.5% before the start of the war in Ukraine and estimated that a complete halt deliveries of Russian gas would inevitably lead to a recession in Europe’s largest economy.
In the United States, where interest rates were raised by 75 basis points last week, inflation also remains a major concern as Jerome Powell, the chairman of the United States Federal Reserve (Fed), must speak before the Senate on Wednesday and the House of Representatives on Thursday. WALL STREET VALUES TO FOLLOW
Growth stocks like Microsoft, Meta Platforms, Apple, Alphabet, Amazon and Tesla gain 1.4% to 3.1% in trading ahead of Wall Street’s open after the three-day ‘Juneteenth’ weekend .
VALUES IN EUROPE In Europe, the automotive segment (+1.3%) posted the best sector performance, while on the other side of the spectrum, utilities (-1.15% ) shows the largest decline.
The banking sector (+0.89%) is also in demand, in a context of rising bond yields.
On the CAC 40, Crédit Agricole takes 1.96%, Societe Generale 1.79% and BNP Paribas 2.08%, while elsewhere in Europe Intesa Sanpaolo advances by 1.06% and Commerzbank by 3.61%.
Airbus (+0.22%) is also in the green after the announcement of a large order from EasyJet, estimated at 6.5 billion dollars (6.2 billion euros) at list prices.
The Italian defense group Leonardo (+5.26%), one of the best performances of the Stoxx 600, is driven by the announcement of the acquisition by its American subsidiary DRS of the Israeli RADA Electronic Industries, which will allow DRS to be listed on the Nasdaq.
In London, the British distributor Ocado fell by 6.08% after a capital increase of 575 million pounds sterling (670 million euros).
On the SBF 120, Valneva, at its highest since May 20, still gains 16.8% the day after a jump of 29.3%, following the announcement of Pfizer’s acquisition of a stake in the capital of the laboratory. Nantes.
RATES Bond yields continue to rise amid concerns about rising prices, with Philip Lane, the ECB’s chief economist, warning of an “inflationary psychosis”.
The yield of the ten-year German Bund takes 11.4 basis points to 1.776%, its French equivalent of the same maturity, 12.4 points to 2.336% and the Italian more than ten points to 3.782%.
Unicredit analysts expect the ten-year Bund rate, the benchmark for the euro zone, to hit 2% in the coming months.
In the United States, the yields of ten-year Treasuries took 5.5 basis points to 3.2939%.
CHANGES
The euro, up 0.35% at $1.0545, was buoyed by comments from Philip Lane, which suggested a 50 basis point interest rate hike in September is possible.
The dollar, meanwhile, fell 0.43% against a basket of benchmark currencies, affected by renewed appetite for riskier assets and pending further statements from the Fed Chairman.
In cryptocurrencies, bitcoin (+2%) continues to rise above $20,000 after falling below this threshold over the weekend to $17,592, a low since the end of 2020.
OIL
Oil prices are supported by rising demand due to the summer holidays and tight supply conditions, both of which outweigh the risks of a slowing economy.
Brent rose 1.24% to 115.53 dollars a barrel and American light crude (West Texas Intermediate, WTI) 1.64% to 111.2 dollars.
NO MAJOR ECONOMIC INDICATOR ON THE JUNE 21 AGENDA
(Report Claude Chendjou, edited by Kate Entringer)