by Claude Chendjou
PARIS (Reuters) – European stock markets ended lower on Tuesday and Wall Street was also trading in the red mid-session as better-than-expected inflation figures in the euro zone revived risk aversion and fears of inflation. a sharp rise in interest rates, while in the United States Joe Biden will discuss the soaring prices with the chairman of the Fed.
In Paris, the CAC 40 ended down 1.43% at 6,468.8 points. The British Footsie dropped 0.08% and the German Dax fell 1.29%.
The EuroStoxx 50 index fell by 1.36%, the FTSEurofirst 300 by 0.83% and the Stoxx 600 by 0.72%.
Over the whole month, the Parisian index lost 0.99% and the pan-European Stoxx 600 1.09%.
Eurostat’s first estimate showed on Tuesday that inflation in the euro zone hit a new high in May at 8.1% year on year after 7.4% in April against the backdrop of an uninterrupted rise in energy prices. and food products.
“The problem of inflation in the eurozone is getting worse,” said Christoph Weil, economist at Commerzbank. “Today’s price data once again increases the pressure on the ECB to end its ultra-loose monetary policy,” he added.
Banque de France Governor François Villeroy de Galhau said on Tuesday that rising inflation confirmed the need for “gradual but resolute monetary normalization” and his counterpart at the Slovak central bank, Peter Kazimir, said that the ECB should keep the option of a half-point rise in its rates in September.
In addition to the data deemed disappointing on inflation, the gross domestic product (GDP) of France contracted in the first quarter by 0.2% and in Germany, a report by the Bank of Spain indicated that the GDP of the EU could fall by 4.2% in the event of a total embargo on Russian energies.
In the United States, where the rise in prices has reached a 40-year high, a meeting between Joe Biden and Jerome Powell, the head of the American Federal Reserve, is scheduled for this Tuesday at 5:15 p.m. GMT, so, says the White House, to discuss the President’s top priority of “fighting inflation to move from a historic economic rebound to stable and steady growth in tune with the working classes”.
Christopher Waller, one of the Fed governors, argued on Monday for a 50 basis point increase in the cost of credit until there is a “substantial” drop in inflation, dampening hopes for a a pause in the rise in interest rates in September, which notably enabled the equity markets to rally last week.
In this context, the volatility index rose again in the United States to 26.8 points (+4%) and in Europe, it ended with a gain of 5.9% to 25.1 points.
VALUES IN EUROPE
On the European market, apart from energy (+0.42%) and consumer staples (+0.45%), all the main compartments of the Stoxx 600 ended in the red, with the biggest drop being assets of industry (-1.54%) and new technologies (-1.41%)
The barrel of Brent, supported by the European agreement on a massive embargo on Russian oil, the prospect of strong demand for crude in the United States for the summer season and the easing of health restrictions in China, allowed TotalEnergies, BP and Eni to finish in the green.
On the other hand, the prospect of a rate hike weighed on Worldline, Capgemini and even SAP, which lost 2.4% to 3.1%.
In corporate news, Credit Suisse fell 5.1% as the bank began, according to two sources, a reflection to strengthen its balance sheet after heavy losses in recent years. Deutsche Bank, for its part, fell 2.5% after the announcement by the German prosecutor’s office of a search of the premises of DWS, its asset management subsidiary.
On the upside, Dutch specialty chemicals maker DSM advanced 8% after announcing a planned merger with Swiss firm Firmenich and the sale of its engineering materials subsidiary to the Advent International fund and the German chemist Lanxess (+11.1%).
Unilever gained 9.4% after announcing the entry of activist investor Nelson Peltz to its board of directors.
AT WALL STREET
At the close in Europe, the Dow Jones fell 0.42%, the Standard & Poor’s 500 0.32% and the Nasdaq 0.05%.
Ten of the S&P’s 11 major sectors are trading in the red, mainly affected by inflation fears as the market last week believed that the peak had been reached after the release of the “core PCE” price index in the States -United.
The digital giants are retreating like Apple and Microsoft, which lost around 1% each, their sector index also losing around 1%.
Oil groups such as Exxon Mobil and Occidental Petroleum are sought after in the wake of rising crude prices.
Canadian gold producer Yamana Gold jumped 6.5% on the back of a $6.7 billion (€6.3 billion) takeover bid for South African Gold Fields (-21, 6%).
CHANGES
The dollar rose 0.12% against a basket of benchmark currencies after five sessions of decline, but it is expected to fall by around 1% in May, its biggest monthly loss in a year.
The euro fell 0.52% to 1.0721 dollars but is heading for its best monthly performance in a year, with inflation figures in the euro zone pleading for a sharp increase in ECB rates.
RATE
Record inflation in the euro zone helped bond yields rise in Europe. Markets now expect a rate hike of 115 basis points by the end of the year compared to an increase of 110 last week.
The 10-year German Bund rate took eight basis points to 1.125% after a peak of more than three weeks in session at 1.128%. Its two-year equivalent rose to 0.503% (+6.2 points).
The ten-year UK bond yield peaked since July 2015 at 2.094% and the 30-year yield peaked since May 2016 at 2.361%.
In the United States, the yield on ten-year Treasuries gained 11.3 basis points to 2.862%, supported in particular by statements by Christopher Waller.
OIL
The oil market is driven mainly by the decision of the Heads of State and Government of the European Union to immediately ban more than two thirds of Russian oil imports and to end these at 90% by the end of the year.
The barrel of Brent and that of American light crude oil (West Texas Intermediate, WTI), which have hit their highest since March 9, respectively advance by 1.87% to 123.95 dollars and by 2.09% to 117, $17.
(Written by Claude Chendjou, edited by Jean-Michel Bélot)