Europe’s stock market closes higher, Wall Street in the red

by Augustin Turpin

(Reuters) – European stock markets ended higher on Friday while Wall Street moved into negative territory mid-session, in a context of sluggish trading for the last trading day of the year, with optimism for a decline rate of the major central banks continuing to drive the markets, in the absence of other indicators.

In Paris, the CAC 40 ended with an increase of 0.11% to 7,543.18 points. The British Footsie takes 0.14% and the German Dax 0.30%.

The EuroStoxx 50 index gained 0.14%, the FTSEurofirst 300 0.2% and the Stoxx 600 0.15%.

On Wall Street, trading was subdued in the final session of an overall positive year, with the benchmark S&P 500 hovering around its all-time high.

The S&P is up nearly 25% this year thanks to a massive rally in large-cap technology groups, while the STOXX 600, which is at its 23-month high, is heading for an annual gain of nearly 13%, driven by a sharp increase in November and December.

“We have absorbed a large part of the expected returns in 2024. Positive market dynamics are obviously associated with falling yields, and the question now is how long this trend can continue,” said analyst Samy Chaar Lombard Odier.

Future yields “are probably more moderate” than they were at the start of November, added Samy Chaar, who indicates that if long-term US interest rates settle around 3.5% or 4%, there is “little risk of a big turnaround” and that continued corporate profits could add “a few percentages of upside.”

A WALL STREET

At closing time in Europe, the Dow Jones lost 0.33%, the Standard & Poor’s 500 -0.49% and the Nasdaq Composite -0.77%.

In terms of values, Fisker shares gained 13.6%, the manufacturer of electric vehicles having announced an increase in its deliveries of more than 300% from one quarter to the next.

CHANGES

The dollar increased slightly (+0.02%) against a basket of reference currencies, but should still end 2023 with a loss after two consecutive years of increase, driven by investors’ hopes of a easing of interest rates by the Fed, while the euro lost 0.01% to 1.1061 dollars.

“Markets are expecting a cut (rates) sooner in the United States and are less certain that the European Central Bank (ECB) will cut its rates as quickly, which is why the dollar is very soft,” commented Niels Christensen, analyst at Nordea.

“Risk appetite is also positive, which is another negative factor for the dollar,” he added.

RATE

Euro zone bond yields are falling, continuing the trend of the last two months of the year, when inflation slowed more than expected and the European Central Bank signaled that its rate hike cycle was almost definitely over, prompting investors to bet on big rate cuts next year.

The ten-year German Bund yield rose 8.3 basis points to 2.023%.

According to UBS analyst Emmanouil Karimalis, Friday’s moves are likely a “correction” after the mass rally.

“Personally, I’m a little skeptical as to why (yields) are expected to fall from now on,” he said, adding that governments will sell a lot of debt next year and that the month of January is typically a busy period for emissions, which could put pressure on yields.

In the United States, the yield on ten-year Treasury bonds gained 0.7 basis points to 3.8567%.

“The market appears to be drifting towards a downward flattening movement, with little real activity behind it as many investors are still absent during the holiday season,” said Gennaviy Goldberg, analyst at TD Securities.

OIL

Oil prices are increasing but are expected to end 2023 down around 10%, after two years of increases, with geopolitical concerns, production cuts and measures taken by central banks to control inflation having led to significant price fluctuations.

Brent rose 0.19% to $77.30 per barrel, with American light crude (West Texas Intermediate, WTI) increasing 0.04% to $71.8.

(Writing by Augustin Turpin, edited by Kate Entringer)