Europe ends up, relieved on the trajectory of US rates

PARIS (Reuters) – European stock markets ended higher on Friday, after a burst of indicators pointing to a slowdown in American activity and a decline in inflationary pressures around the world.

In Paris, the CAC 40 gained 0.91% to 7,233.91 points, while the German Dax gained 0.84% ​​and the British Footsie 1.26%.

The EuroStoxx 50 index ended the session up 0.89%, the FTSEurofirst 300 up 0.96% and the Stoxx 600 up 1.01%.

The markets were relieved by the burst of indicators published this week showing that, on both sides of the Atlantic, activity and inflation are slowing – at the risk, however, of a contraction of the economy.

The CPI inflation indicator in the United States published on Tuesday was less strong than expected by the consensus, growing by 3.2% over one year against 3.3% expected.

Furthermore, retail sales, industrial production and imports are in decline, an indication that the US economy is starting to slow down, after being supported by consumer resistance.

Last piece of the puzzle, tensions in the labor market seem to be dissipating: unemployment claims have surprised on the rise and the “Empire State” and “Philly Fed” indicators show a weakening of medium-term employment prospects.

All of these factors are giving investors hope that the US central bank has reached its peak interest rates and will be forced to ease them before the economy falls too deep into recession.

Several monetary policy makers in the United States, including the president of the Federal Reserve of Chicago, Austan Goolsbee, however warned on Friday that the fight against inflation was not yet over.

In the United Kingdom, wages slowed more than expected in October, according to data released on Tuesday, while inflation also fell.

The situation in the euro zone is more complicated, even if inflation was confirmed at 2.9% year-on-year in October on Friday.

The European Commission on Wednesday lowered its outlook for the bloc’s growth in 2023 but estimates it will rebound in 2024.

VALUES

Eiffage advanced 3.92%, after announcing on Thursday the signing of a contract worth more than 4 billion euros with EDF to carry out the civil engineering work for the first two EPR2 type reactors at Penly.

Volvo Cars fell 11.14% to a historic low, after the decision of its parent company, Geely, to sell shares in the automaker at a steep discount.

Embracer jumped 9.51%, leading the Stoxx 600, after its second quarter results.

A WALL STREET

Wall Street is hesitant despite the encouraging data, with several members of the Fed’s board of governors reiterating that it was too early to declare the fight against inflation over.

At closing time in Europe, trading on the New York Stock Exchange indicated a decline of 0.10% for the Dow Jones, against a hesitant Standard & Poor’s 500 and a drop of 0.21% for the Nasdaq Composite. .

RATE

Yields are showing a modest increase following comments from monetary policy makers.

At the close of the European interest rate markets, the yield on the ten-year Treasury rose 1 basis point to 4.4549%, compared to 6.7 bp for the two-year rate at 4.9089%.

The yield on the German ten-year rose 1 bps to 2.5890%, while that of the two-year rate rose 1.3 bps to 2.963%.

CHANGES

The dollar is declining, with several indicators giving markets hope that the Fed is done with rate hikes.

The dollar lost 0.23% against a basket of reference currencies, while the euro gained 0.22% to 1.0874 dollars. The pound sterling rose 0.14% to $1.2423.

OIL

Crude crude rebounds after falling 5% on Thursday but is nevertheless heading for its fourth consecutive weekly loss.

Brent rose 3.35% to $80.01 per barrel and American light crude (West Texas Intermediate, WTI) rose 3.25% to $75.27.

(Written by Corentin Chappron, edited by Bertrand Boucey)