EUROPE FINISHES IN THE RED, INFLATION AND GROWTH CONCERN
by Claude Chendjou
PARIS (Reuters) – European stocks ended lower on Tuesday on fears of a rapid rise in interest rates and lower growth forecasts for the global economy, but Wall Street was moving against the tide. of Europe at mid-session thanks in particular to the results of the companies.
In Paris, the CAC 40 ended with a loss of 0.83% to 6,534.79 points. The British Footsie fell by 0.2% and the German Dax by 0.07%.
The EuroStoxx 50 index fell 0.47%, the FTSEurofirst 300 0.7% and the Stoxx 600 0.77%.
As part of the publication of its global economic outlook, the International Monetary Fund (IMF) announced on Tuesday that it now expects global growth of 3.6% in 2022 as in 2023, i.e. 0.8 percentage point less than expected. in January for this year and 0.2 points less for next year, due to the war in Ukraine.
The IMF added that inflation now represented “a clear and very present danger” for many countries, while the Russian-Ukrainian conflict puts the global financial system to the test.
On Monday, the World Bank also cut its global growth forecast for this year by almost a percentage point to 3.2% from 4.1%, due to the war in Ukraine.
According to Ukrainian authorities, the Russian army seized a small town in the Luhansk region on Tuesday, the first since the outbreak of the “battle of Donbass”, presented by Moscow as a “new phase”.
This war, which is contributing to the rise in prices, is itself fueling the rise in bond yields, increasing the pressure on central banks to raise their interest rates.
St. Louis Federal Reserve Chairman James Bullard reiterated Monday that he wants interest rates to rise to 3.5% by the end of the year in the face of inflation at a 40-year high.
In Europe, the absence of signs from the European Central Bank (ECB) on a possible acceleration of its monetary tightening revived the prospect of a rate hike.
“There is no longer any question whether the ECB will raise its interest rates or not by the end of the year, I think it will,” said François Savary, director of investments at Prime Partners, a wealth management firm.
Sources also told Reuters last week that the ECB could raise interest rates as early as July.
The yield of the ten-year Bund ended on a gain of 7.6 basis points to 0.916% after touching 0.93%, the highest since July 2015. Its French equivalent of the same maturity advanced by 4.4 points at 1.398%, after a peak since September 2014, at 1.414%. The rate of 30-year US Treasury bonds for its part touched the 3% threshold for the first time since the beginning of 2019 and that of ten years a peak since the end of 2018 at 2.924%.
VALUES IN EUROPE
On the pan-European Stoxx 600, the new burst of results published by companies did not reassure investors about the impact of the conflict in Ukraine and high inflation on their accounts.
Cosmetics giant L’Oreal, which is due to release quarterly sales after the close, fell 2.9%.
Scor lost 5.1%, the French reinsurer having warned that its first quarter results would be affected by the Russian-Ukrainian conflict.
On the upside, animal health specialist Virbac (+9.9%) was driven by the increase in its annual turnover growth target, while Carrefour (+2%) benefited from a change recommendation of Berenberg.
At the sectoral level, only two major compartments escaped the decline: energy (+0.58%) and industry (+0.35%). TotalEnergies gained 1.4% and BP 0.4% in a volatile market.
AT WALL STREET
At the close in Europe, the Dow Jones was up 1.1%, the Standard & Poor’s 500 1.3% and the Nasdaq 1.9%, as optimism over corporate results momentarily took precedence over fears of an acceleration in rate hikes.
“The earnings season is diverting some of the attention that had been very focused on the correlation between bond yields and the decline in growth stocks,” said Art Hogan, market strategist at National Securities.
Johnson & Johnson rises more than 3% on quarterly profit above market expectations. The group also raised the amount of the dividend paid to shareholders.
Tech stocks like Microsoft (+1.3%), Apple (+1.2%) and Amazon (+3%) are resisting the upward movement in bond yields.
Of 49 S&P-500 companies that have already released their first-quarter results, 79.6% have so far beat earnings forecasts, according to Refinitiv data, compared to 66% overall.
CHANGES
The dollar rose 0.20% against a basket of benchmark currencies on Tuesday after hitting its highest level since May 2002 against the yen at 128.765 and closing in on a two-year high against the euro at 1.0756. The greenback is supported by high US Treasury yields and policy divergences from the Fed, ECB and Bank of Japan.
The euro is trading at 1.0791 dollars at the close of trading in Europe.
OIL
The oil market, volatile, is moving in decline at the close of trading in Europe, penalized by the lowering of the IMF’s economic forecasts.
The barrel of Brent yields 4.84% to 107.72 dollars and American light crude (West Texas Intermediate, WTI) 5.01% to 102.79 dollars.
(Report Claude Chendjou, edited by Sophie Louet)