EUROPEAN STOCK MARKETS END UP
by Claude Chendjou
PARIS (Reuters) – European stock markets ended higher on Wednesday and Wall Street also moved in the green at mid-session, the positive trend in the equity markets being driven by the results generally above the expectations of companies under the fourth trimester.
In Paris, the CAC 40 ended with a gain of 0.55% to 7,172.98 points. The British Footsie gained 0.35% and the German Dax 0.24%.
The EuroStoxx 50 index advanced 0.25%, the FTSEurofirst 300 0.15% and the Stoxx 600 0.23%.
While rising bond yields had weighed on equities in recent sessions, earnings releases are rekindling risk appetite.
The latest data from Refinitiv shows that companies in the Stoxx 600 are expected to post profit up 48.6% year on year in the quarter to the end of December, compared to 48.5% in the previous estimate.
“Fourth-quarter earnings are going to be good, but it will be important to understand how companies are coping with rising prices, especially energy prices and wages,” said Philipp Lisibach, strategist at Credit Suisse.
The weakness of the gains of the indices, however, testifies to a certain caution on the markets one week before the monetary policy meeting of the American Federal Reserve. Investors are counting on a rate hike cycle starting in March to counter inflation.
In Europe, although the European Central Bank (ECB) pledged last month to continue to support the economy, inflation is also a cause for concern.
Inflation in Germany came out on Wednesday in line with expectations, but it shows an increase of 5.7% over one year in December while the ECB’s target is 2%.
The institution will publish the minutes of its December monetary policy meeting on Thursday after the final eurozone inflation figures for the same month.
VALUES IN EUROPE
In Europe, the positive trend was mainly supported by the luxury segment after the results of Richemont (+5.15%) and Burberry (+6.3%). The owner of the Cartier jewelry house posted better-than-expected sales in the Christmas quarter, while Burberry raised its full-year profit forecast.
In Paris, LVMH took 3.6%, Kering 1.9% and Hermès 2.3%.
On the downside, ASML fell 2.3%, despite announcing a forecast of 20% growth in sales for this year. The semiconductor manufacturing equipment giant said it does not yet have US approval to sell its new lithography machines in China.
M6 and TF1 respectively sold 8.06% and 7.3% after the exit of CNP, the holding company of the Frère family, from the capital of M6. Nantes-based biotech company Valneva fell 12% after the European Medicines Agency requested further information on its COVID-19 vaccine candidate.
At the sector level, distribution (+1.7%) and personal and household products (+2.1%) also benefited from the good results of companies.
AT WALL STREET
At the time of the closing in Europe, the Dow Jones advanced by 0.2%, the Standard & Poor’s 500 by 0.1%, while the Nasdaq was almost stable.
According to IBES data from Refinitiv, companies making up the S&P-500 index are expected to post profits up 23.1% year-on-year in the October-December period.
The positive trend on Wall Street is also maintained by the publication of financial accounts, in particular those of UnitedHealth Group and Procter & Gamble, whose shares have gained 1.7% and 4.2% respectively. The first reported a quarterly profit above expectations, while the second raised its forecast for annual turnover.
After mixed announcements last week from JP Morgan Chase and Citigroup, Bank of America Corp (+1.2%) and Morgan Stanley (+2.6%) also pleasantly surprised investors on Wednesday with their results and forecasts.
CHANGES
In foreign exchange, the dollar, down 0.2%, catches its breath after hitting a two-week high on Tuesday on the back of rising US Treasury yields.
The euro, down 0.24%, remains below the threshold of 1.14 dollars.
The pound sterling appreciates against the euro and the dollar due to a further acceleration of inflation in the United Kingdom in December, to 5.4% year on year, which could lead the Bank of England raise its policy rate again.
RATE
Bond yields in the United States are losing ground after the sharp rise in recent sessions.
That of ten-year Treasuries fell by 3.2 basis points to 1.836%, while the two-year rate is still trading above the 1% threshold, at 1.0102%.
In Europe, the yield on the ten-year German Bund, a benchmark for the euro zone, returned during the session, for the first time since May 2019, to positive territory, rising to 0.025%, before ending at -0.009%.
Markets are now pricing in an ECB rate hike in September and another in December.
OIL
The oil market continues its bullish trend, heading for a fourth consecutive session in the green amid geopolitical tensions that could fuel the imbalance between supply and demand.
The barrel of Brent advances by 1.55% to 88.87 dollars and American light crude (West Texas Intermediate, WTI) by 2.24% to 87.34 dollars.
(Report Claude Chendjou, edited by Bertrand Boucey)