Europe ends in the red, risk aversion returns – 05/05/2022 at 18:46


EUROPEAN STOCK EXCHANGES, EXCEPT LONDON, END LOWER

by Claude Chendjou

PARIS (Reuters) – European stock markets, with the exception of London, ended lower on Thursday and Wall Street was also trading in the red at mid-session, the prospect of an acceleration in monetary tightening, fears of a recession and the mixed results of companies having taken precedence over the optimism aroused the day before by the remarks of the president of the American Federal Reserve on the extent of the increase in the next interest rates.

In Paris, the CAC 40 ended down 0.43% at 6,368.4 points. The British Footsie, however, gained 0.13%. The German Dax lost 0.49%.

The EuroStoxx 50 index fell by 0.76%, the FTSEurofirst 300 by 0.62% and the Stoxx 600 by 0.7%.

The Fed raised its main interest rate by half a point on Wednesday, its biggest hike in nearly 22 years, but Fed Chairman Jerome Powell said three-quarter-point rate hikes were not “actively” considered by the members of the Federal Open Market Committee (FOMC) to fight against inflation, which helped to reassure the markets in the United States the day before and at the start of the session in Europe.

European stock markets, however, erased all of their gains at the close, caught up in fears of a recession, inflation, the war in Ukraine and the resurgence of the COVID-19 pandemic, all of which weigh since the beginning of the year on the markets.

The Bank of England (BoE), which raised its interest rate on Thursday to 1%, its highest level since 2009, in order to counter inflation which could reach more than 10% this year, warned that the economy Britain could fall into recession.

In the euro area where inflation reached 7.5% year on year in March, its highest level since the creation of the single currency, Olli Rehn, one of the members of the Governing Council of the European Central Bank ( ECB), said Thursday that it was in favor of raising the deposit rate, currently set at -0.5%, by a quarter of a point in July.

Philip Lane, the ECB’s chief economist, however, believes that the path of the rate hike is more relevant than the timing itself.

In addition to fears about monetary policies, there are mixed results published by several large groups.

Sign of the renewed nervousness of the market, the index measuring volatility in the United States, up 24%, returned to more than 31 points, while its European equivalent finished up 4.9%.

VALUES IN EUROPE

In Europe, the banking compartment (-1.8%), which has lost nearly 30% since the Russian invasion of Ukraine, suffered in particular from provisions on war-related claims recorded by banks.

Societe Generale, sanctioned for the increase in its provisions, ended down 2.5% despite quarterly results better than expected. Credit Agricole, for its part, lost 4%.

UniCredit (+2.2%) managed to pull out of the game thanks to the confirmation of a share buyback program while the Italian bank’s first quarter profit fell sharply.

Also on the upside, Airbus jumped 6.2% after posting better-than-expected quarterly results and raising its production target for the A320.

Publications by Air France-KLM (+2.94%), Legrand (+1.5%) and Shell (+3%) were also well received, while CGG (-18.6%) suffered the largest drop in the SBF 120.

From a sector perspective, the defensive real estate (+1.2%) and healthcare (+0.9%) compartments posted the best gains, while cyclical consumption (-2.1%) and finance (-1.7%) finished bottom of the Stoxx 600.

AT WALL STREET

At the time of the close in Europe, the Dow Jones fell 2.8%, the Standard & Poor’s 500 3.3% and the Nasdaq 4.5%, with all major sectors of the S&P-500 in the red, the consumption segment of goods and services considered non-essential lost more than 5%.

Values, Citigroup fell 1.5%, posting one of the largest declines among the major banks on Wall Street whose sector index lost 1.6%.

New technology giants Apple, Microsoft, Meta Platforms, Google, Amazon.com and Tesla dropped 4.5% to 6.5% and their sector index fell 4.6%.

“I think the markets don’t believe in Fed policy accommodation,” said eToro analyst Callie Cox.

Traders on Thursday were pricing in a 75% chance of a three-quarter point rate hike at the US central bank’s June 15 meeting.

On the upside, Twitter gained 3.2% after the announcement that Elon Musk had obtained funding for the takeover of the social network.

Among the publications of results, eBay for its part fell by 10.5%, penalized by its sales forecast for the second quarter.

THE INDICATORS OF THE DAY

UK private sector growth hit its weakest pace in three months in April, with the composite PMI index falling to 58.2, the final results of the S&P Global monthly survey of purchasing managers showed on Thursday.

The weekly jobless claims in the United States show that the labor market remains tight, even if the number of Americans who filed for unemployment benefits last week rose more than expected, to 200,000.

CHANGES

The dollar appreciated by 1.26% against a basket of reference currencies in anticipation of sharp rate hikes in the United States.

The euro fell to $1.04 in response to a sharper than expected drop in orders to German industry in March with the war in Ukraine.

The pound fell more than 2% to $1.1236, its lowest level since July 2020, after the BoE’s unsurprising decision to raise rates by a quarter point.

RATE

Bond yields are up: that of ten-year Treasuries rises to 3.0859% after falling Wednesday in session to 2.901% following statements by Jerome Powell.

In Europe, that of the ten-year German Bund ended with a gain of 6.1 basis points to 1.043% and its French equivalent gained 5.6 points to 1.567%.

OIL

The oil market is broadly stable, with a stronger dollar offsetting supply concerns in the wake of the European Union’s proposal to include an embargo on Russian oil imports in a new sanctions package against Moscow.

Brent fell 0.22 to 109.93 dollars a barrel and US light crude (West Texas Intermediate, WTI) lost 0.5% to 107.35 dollars.

TO BE FOLLOWED ON FRIDAY:

THE MARKET SITUATION

THE FENCE IN

EUROPE

Indices Last Var. Var. %YTD

Points

Eurofirst 300 1717.80 -10.76 -0.62% -9.12%

Eurostoxx 50 3696.63 -28.36 -0.76% -14.00%

CAC 40 6,368.40 -27.28 -0.43% -10.97%

Dax 30 13,902.52 -68.30 -0.49% -12.48%

FTSE 7503.27 +9.82 +0.13% +1.61%

SMI 11877.27 -2.97 -0.02% -7.75%

The values ​​to follow

Paris and Europe:

[WATCH/LFR]

THE TREND TO

WALL STREET

Indices Last Var. Var. %YTD

Points

Dow Jones 33056.16 -1004.90 -2.95% -9.03%

S&P 500 4155.81 -144.36 -3.36% -12.81%

Nasdaq 12376.31 -588.55 -4.54% -20.89%

Nasdaq 100 12920.32 -615.39 -4.55% -20.83%

Minutes of the meeting at

Wall Street: [.NFR]

“The Day Ahead” – The Point

on the next session

Wall Street [DAY/US]

CHANGES

Standby Price Var.% YTD

Euro/Dlr 1.0511 1.0621 -1.04% -7.54%

DLR/Yen 130.43 129.07 +1.05% +13.36%

Euro/Yen 137.12 137.09 +0.02% +5.22%

DLR/CHF 0.9875 0.9720 +1.59% +8.25%

Euro/CHF 1.0380 1.0323 +0.55% +0.11%

Stg/Dlr 1.2344 1.2621 -2.19% -8.76%

Index $ 103.8910 102.5870 +1.27% +8.03%

GOLD

Var. %YTD

Gold Spot 1876.08 1880.92 -0.26% +23.67%

RATE

Last Var. Spread/

Bund

(pts)

Future Bunds 152.31 -0.87

10-year Bund 1.05 +0.00

2-year Bunds 0.29 +0.01

10-year OATs 1.58 +0.01 +53.40

10-year Treasury 3.08 +0.17

2-year Treasury 2.73 +0.11

OIL

Previous Price Var. Var.% YTD

US light crude 106.97 107.81 -0.84 -0.78% +74.76%

Brent 109.60 110.14 -0.54 -0.49% +65.99%

(Some data may show a slight shift)

(Report Claude Chendjou, edited by Sophie Louet)



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