EUROPE END DOWN, CAUTION BEFORE FED
by Claude Chendjou
PARIS (Reuters) – European stock markets ended lower on Tuesday and Wall Street was also trading in the red mid-session, with equity markets hurt by rising bond yields amid expectations of higher rates of interest this year in the United States.
In Paris, the CAC 40 ended down 0.94% at 7,133.83 points. The British Footsie dropped 0.63% and the German Dax 1.01%.
The EuroStoxx 50 index fell by 1.03%, the FTSEurofirst 300 by 0.75% and the Stoxx 600 by 0.97%.
The US Federal Reserve (Fed) monetary policy committee meets on January 25 and 26 and investors are counting on a cycle of rate hikes starting in March to counter inflation.
In Japan, the country’s central bank on Tuesday raised its inflation forecast for the fiscal year beginning next April and noted an increased risk that the recent price rise will extend beyond commodities.
On the Old Continent, even though the European Central Bank (ECB) pledged last month to continue to support the economy, money markets now assess the probability of a 20 basis point hike in rates at 100%. of the institution by next December.
On Wednesday and Thursday, the final inflation figures for Germany and the euro zone will be published respectively for the month of December.
The start of the corporate earnings season is also prompting investors to be cautious.
VALUES IN EUROPE
In Europe, the announcement of the acquisition of Activision Blizzard by Microsoft for an amount of 68.7 billion dollars (59.5 billion euros) has shaken the video game sector.
Ubisoft, seen by some analysts as the industry’s next target after TakeTwo also bought Zynga last week for $12.7 billion, gained 11.86%. Rovio, CD Projekt, Frontier and Paradox gained 2.24%, 1.54%, 6.06% and 2.84% respectively.
At the sectoral level, the rise in oil prices enabled the European energy sector (+1.05%) to escape the general decline in the major indices.
TotalEnergies gained 1.49%, TechnipFMC 2.13% and CGG 2.03%.
The air transport and leisure sector (-1.49%) was however penalized by the rise in crude oil prices. Lufthansa and Air France-KLM lost 1.55% and 1.09% respectively
The new technologies compartment was affected by the rise in bond yields, Worldline dropping 3.86% and Dassault Systèmes 1.55%.
Elsewhere in Europe, chocolate maker Lindt & Sprüngli lost 2.96% after the publication of its results which showed a slowdown in activity in North America due to bottlenecks in the supply chain.
AT WALL STREET
At the time of the close in Europe, the Dow Jones fell by 1.43%, the Standard & Poor’s 500 by 1.46% and the Nasdaq by 1.78%, penalized in particular by the decline in technology stocks (-1.56 %) and by Goldman Sachs (-7.66%), energy (+0.41%) being the only sector in the green.
After mixed announcements from JP Morgan Chase and Citigroup last week, which kicked off quarterly corporate accounts season, Goldman Sachs reported earnings below expectations on Tuesday. The banking index fell by 2.39%
Microsoft (-1.33%) and Activision Blizzard (+27.18%) also drive the trend on Wall Street after their merger operation. Electronic Arts, Take-two interactive software and Zynga take 5.3%, 4.01% and 1.06% respectively.
THE INDICATORS OF THE DAY
In Germany, investor sentiment has improved much more significantly than expected since the beginning of January, with a ZEW index at 51.7 after 29.9 in December, the institute’s monthly survey shows on Tuesday. of economic studies.
In the United States, manufacturing activity in the New York area for its part contracted sharply in January, going into negative territory for the first time since June 2020, according to the monthly survey of the regional branch. of the Federal Reserve.
CHANGES
On the foreign exchange market, the dollar benefited from the rise in bond yields and gained 0.51% against the other major currencies, heading for a sixth consecutive session in the green.
The euro, down 0.66, fell below the symbolic threshold of 1.14 dollars, at 1.1334.
RATE
Bond yields continue to rise on the prospect of a Fed interest rate hike.
The ten-year US Treasury bond rate gained 7.5 basis points, to 1.8466%, its highest since January 2020, while the two-year rate, the most sensitive to changes in rate expectations, jumped 7.1 basis points to 1.0384%, breaking above the 1% threshold for the first time since February 2020.
In Europe, the ten-year German Bund yield, a benchmark for the euro zone, ended up just under a point, at -0.017%, after rising to -0.002%, a new test of the threshold. zero below which it has been evolving since May 2019.
OIL
The oil market is buoyed by geopolitical tensions, with Houthi rebels claiming responsibility for a drone attack near Abu Dhabi airport on Monday.
Brent crude rose 0.44% to $86.84 a barrel after hitting 88.13, its highest level since October 2014, and US light crude (West Texas Intermediate, WTI) advanced 1.09% to 84, $7 after a high of 85.74.
Goldman Sachs estimates that the price of a barrel of Brent could reach $100 in the second half.
(Report Claude Chendjou, edited by Sophie Louet)