Europe ends the week in the green, China and the decline in yields in support

by Diana Mandia

(Reuters) – European stocks ended higher on Friday, buoyed by dovish comments from an Atlanta Fed official the day before and renewed confidence in China’s economic recovery, despite lingering concerns over rates.

In Paris, the CAC 40 ended up 0.88% at 7,348.12 points. The British Footsie rose 0.04% and the German Dax 1.64%.

The EuroStoxx 50 index for its part ended with a gain of 1.35%, the FTSEurofirst 300 0.93% and the Stoxx 600 0.97%.

Over the whole week, the CAC 40 gained 2.2% and the Stoxx 600 1.48%.

Atlanta Federal Reserve Board Chairman Raphael Bostic on Thursday spoke in favor of a “slow and steady” rate hike, pushing bond yields lower and giving equity markets some respite. , shaken in recent weeks by a series of indicators showing the strength of the labor market and the persistence of inflation.

Stock markets end the week on a deluge of economic indicators showing improving service sector activity in China, the UK, Germany, France and the wider Eurozone.

China’s services PMI, in particular, supported hopes for a strong recovery in the world’s second-largest economy from COVID-19 restrictions, just hours before the annual session of China’s parliament opens on Sunday, during which Beijing will set its economic targets for 2023.

In the euro zone, the recovery in business activity accelerated in February to reach its highest growth rate in eight months, which is the latest sign that the currency bloc will avoid a recession.

In Germany, exports rose more than expected in January, rebounding from January’s plunge on strong demand from the United States and Britain.

The context calls for caution, however: Morgan Stanley on Friday raised its forecast for the European Central Bank’s terminal deposit rate from 3.25% to 4%, following in the footsteps of other major investment banks which have recently revised upwards in their forecasts for the likely path of ECB interest rates.

VALUES

The reopening of China, which is boosting demand prospects, supported mining stocks (+2.12%) on Friday, with Arcelormittal posting a gain of 2.7%, while in London, Anglo American, Rio Tinto and Glencore gained 1.7%, 2% and 2.3% respectively.

Geophysical services and equipment specialist CGG rose 9.9% after its results.

Lufthansa, which returned to a positive result in 2022 and said it expected a significant improvement in its profit in 2023, ended the week up 5% in Frankfurt.

The music major UMG ended in the red at -1.5%, weighed down by an annual gross operating surplus below analysts’ estimates.

AT WALL STREET

Around 5:15 p.m. GMT, the Dow Jones rose 0.7%, the Standard & Poor’s 500 1% and the Nasdaq 1.4%.

CHANGES

The “dollar index”, which measures the movements of the greenback against a basket of currencies, is down 0.2% as markets try to assess the direction of the Federal Reserve’s policy.

The euro rose for its part by 0.15% to 1.0612 dollars.

RATE

U.S. Treasury yields eased Friday from highs hit the previous day as comments from U.S. Federal Reserve officials temporarily eased fears about inflation and interest rates.

The pullback eased after the release of the Institute for Supply Management (ISM) monthly services survey in the US at 1600 CET, with new orders and employment hitting highs not seen in over year, suggesting that the economy continued to expand in the first quarter.

The yield on ten-year US Treasury bonds fell eight basis points to 3.987% and in the euro zone, the German ten-year fell more than three basis points to 2.718%.

OIL

Oil prices on Friday erased some of the losses suffered after the Wall Street Journal reported that the United Arab Emirates was discussing the possibility of leaving OPEC and pumping more oil, information denied to Reuters by a source.

Brent rose 0.84% ​​to 85.46 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.32% to 79.19 dollars.

(Paris editorial office; +33 1 49 49 50 00)