European stock markets expected to fall after inflation

PARIS (Reuters) – The main European stock markets are expected to fall at the opening on Friday, after higher-than-expected US inflation and pessimistic comments from a member of the board of governors of the European Central Bank.

Futures contracts suggest an opening down 0.37% for the Parisian CAC 40, compared to 0.18% for the FTSE in London, 0.39% for the Dax in Frankfurt, and 0.47% for the EuroStoxx 50.

Inflation data released Thursday in the United States was slightly stronger than expected in September, with year-on-year inflation growth reaching 3.7%, compared to 3.6% expected.

The surprise was enough to bounce back bond yields which had fallen significantly since last week’s highs – the 10-year lost 25 basis points – but did not change the basic scenario of the markets, that of a pause in rate increases by the Federal Reserve in November and December.

“With mortgage rates at their highest in 23 years and credit card borrowing costs at their highest, monetary policy seems sufficiently restrictive,” note ING strategists.

“With business price surveys (…) indicating a gradual slowdown in prices, we believe inflation will continue to moderate slowly over the next two quarters.”

Investors will therefore remain attentive to the flow of data: the Michigan household confidence indicator is expected on Friday at 2:00 p.m. GMT.

Comments from Robert Holzmann, member of the board of governors of the Central European Bank, who said that a recession would be necessary in the eurozone to bring inflation down to 2%, are also putting pressure on European stocks.

A WALL STREET

The New York Stock Exchange ended lower on Thursday after a US Treasury auction sent bond yields higher as investors digested a stronger rise in consumer prices in September.

The Dow Jones index fell 0.51%, or 173.73 points, to 33,631.14 points. The broader S&P-500 lost 27.34 points, or 0.62%, to 4,349.61 points. The Nasdaq Composite fell 85.46 points or 0.63% to 13,574.22 points.

IN ASIA

Japanese markets fell after higher-than-expected inflation figures in the United States, but good results from holder Uniqlo limited the Nikkei’s losses. The Nikkei index lost 0.55% to 32,315.99 points and the broader Topix lost 1.47% to 2,308.09 points.

Fast Retailing, which owns the Uniqlo brand and has a significant weighting in the Nikkei index, rose 5.75% after announcing that it expected 18% growth in its profits over the year.

Chinese indexes decline after the release of inflation data in China, which shows prices stagnating and suggests domestic demand remains insufficient. The Shanghai SSE Composite lost 0.83%, the CSI 300 1.26%, the Hong Kong Hang Seng index 2.38%.

CHANGES

The dollar takes a break after jumping on Thursday, following the release of inflation data in the United States.

The dollar declined by 0.17% against a basket of reference currencies, while the euro gained 0.13% to 1.054 dollars, and the pound sterling 0.16% to 1.2192 dollars.

In Asia, the yen strengthened by 0.07% to 149.69 yen per dollar, while the Australian dollar was stable at 0.6313 dollars.

RATE

Yields on US securities are falling after jumping on Thursday, following the publication of inflation figures.

The ten-year Treasury yield fell 4.5 bps to 4.6663%, losing 16 bps since its 16-year high reached four sessions ago, while the two-year yield fell 3.2 bps to 5.039 %.

The German ten-year yield remains stable at 2.78%, while that of the two-year rate erodes by 1.5 bp to 3.144%.

OIL

Oil is rising after new US sanctions on Russian crude exports, and as global inventories are expected to decline in the fourth quarter, according to OPEC data.

Brent advanced 0.71% to $86.61 per barrel, with American light crude (West Texas Intermediate, WTI) gaining 0.92% to $83.67.

(Written by Corentin Chappron, edited by)