by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to rise slightly on Tuesday, while European stock markets are trading in the red mid-session the day after another rout in financial markets amid expectations of a rapid rise in interest rates. interest, raising the specter of a recession. Futures on New York indices signal an opening of Wall Street up 0.10% for the Dow Jones, 0.11% for the Standard & Poor’s 500 and 0.34% for the Nasdaq. In Paris, the CAC 40 fell 0.82% to 5,973.05 around 12:00 GMT. In Frankfurt, the Dax lost 0.39% and in London, the FTSE lost 0.75%.
The pan-European FTSEurofirst 300 index fell by 1.16%, the EuroStoxx 50 of the euro zone by 0.39% and the Stoxx 600 by 0.9%.
The expected rebound on Wall Street is favored by cheap purchases of technology stocks, while the banking and energy compartments are at the top of the pan-European Stoxx 600.
The upward revision of many analysts’ expectations for a US Federal Reserve rate hike, with now the likelihood of a three-quarter point hike on Wednesday, plunged the S&P-500 into a “bear” zone on Monday. market” or bear market, a decline of nearly 22% from its closing peak on January 3.
“The risks of a Fed-induced recession over the next six months have increased, from our perspective,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note.
The Fed begins a two-day monetary policy meeting on Tuesday, which will end with a statement on Wednesday at 6:00 p.m. GMT and a press conference by its chairman, Jerome Powell, half an hour later.
In the euro zone, where the European Central Bank (ECB) announced last week that it plans to raise its interest rates in July by 25 basis points, Klaas Knot, one of the institution’s members, said on Tuesday that a half-point increase in the cost of credit in September was not the only possible option in the face of galloping inflation.
Inflation in Germany was confirmed on Tuesday to be up 8.7% year on year in May, while investor sentiment remains at historically low levels, although it has improved slightly this month, l the Zew index came out at -28.0 after -34.3. WALL STREET VALUES TO FOLLOW
The IT group Oracle jumped 13.2% in pre-market trading after reporting Monday evening quarterly results above expectations thanks to demand for its cloud computing products and services.
VALUES IN EUROPE On the pan-European Stoxx 600, which has lost nearly 17% since its peak in January, the banking compartment has gained 1.07% and that of energy 0.34%, the two sectors being the only ones in the green mid-session.
BNP Paribas, Societe Generale, Unicredit rose by 0.9% to 1.7% in the wake of rate hike expectations, while TotalEnergies and BP advanced by 1.2% and 1.03% respectively thanks to a further rise in oil prices.
In corporate news, Atos fell 23.5%, the lowest since 2009, after the departure of its CEO, Rodolphe Belmer, against a backdrop of strategic disagreements and the announcement of a plan to split the group in two independent listed entities.
Worldline plunges 6.9% after the sale by Atos of its stake of around 2.5%.
Elsewhere in Europe, Akzo Nobel lost 5.6% as the Dutch paints and coatings maker issued a second-quarter operating profit warning due to health restrictions in China and weak demand in Europe.
RATE
Bond yields in Europe continue to rise, with money markets now pricing in an ECB rate hike of 175 basis points by the end of the year from a 170 increase on Monday. Interbank borrowing rates within the euro zone also recorded an unprecedented increase for several years on Tuesday.
The ten-year German Bund yield, up almost four basis points, touched a high since April 2014 at 1.673%.
Its French equivalent of the same maturity rose by almost five points to 2.293%, while the yield on Italian bonds, up seven points, stood at 4.173%.
However, the yield spread between German and Italian ten-year bonds is widening to around 250 basis points, due to a lack of precision from the ECB on the means it is prepared to mobilize to prevent a fragmentation of the region. An intervention by Isabel Schnabel, member of the Executive Board of the ECB, is expected on the subject at 17:00 GMT.
In the United States, the yield on ten-year Treasury bills, which reached a peak since 2011 at 3.381% on Monday, fell nearly five points to 3.3218%, but that of two-year bonds rose again, by nearly three. points, at 3.3154%.
EXCHANGES The dollar, which hit a 20-year high on Monday, is virtually unchanged against other major currencies (-0.02%). The greenback is supported by the prospect of a 75 bp rate hike on Wednesday. Goldman Sachs expects increases of this magnitude this month and in July as well as an increase of 50 points in September.
The euro took 0.37% against the dollar at 1.0447 dollar.
OIL
Oil prices are rising, supported by signs of tight supply which are taking precedence over the prospect of a drop in demand linked to the risk of recession and new health restriction measures in China.
Several sources within OPEC and the oil sector, however, indicated that growth in global oil demand should slow next year.
The barrel of Brent advances by 0.81% to 123.26 dollars and that of American light crude (West Texas Intermediate, WTI) by 0.58% to 121.61 dollars.
(Written by Claude Chendjou, edited by Kate Entringer)