Market: Caution back ahead of the Fed and U.S. retail sales


by Claude Chendjou

PARIS (Reuters) – Wall Street is expected to fall on Wednesday and European stock markets are trading in the red mid-session awaiting retail sales figures for July in the United States and the publication of the report of the last monetary policy meeting of the US Federal Reserve (Fed).

New York index futures signal Wall Street opening down 0.64% for the Dow Jones, 0.82% for the Standard & Poor’s 500 and 0.95% for the Nasdaq

In Paris, the CAC 40 fell 0.5% to 6,559.6 around 11:45 GMT. In Frankfurt, the Dax lost 1.13% and in London, the FTSE lost 0.41%.

The pan-European FTSEurofirst 300 index fell by 0.45% and the EuroStoxx 50 in the euro zone by 0.7%. The Stoxx 600 lost 0.44% after five consecutive sessions of increases.

The trend is weighed down by renewed fears about inflation and growth, while the growth of gross domestic product (GDP) in the euro zone in the second quarter was slightly less sustained than initially announced (+0.6% in instead of +0.7%), according to Eurostat’s second estimate.

As for inflation, consumer price inflation in the UK hit 10.1% year on year in July, its highest level since February 1982.

Investors are now awaiting U.S. retail sales statistics and the “minutes” of the Fed’s July meeting which will be released at 12:30 GMT and 6:00 p.m. GMT respectively.

These new data could help to better assess the risk of a recession and the extent of the expected rate hike by the US central bank in September.

WALL STREET VALUES TO FOLLOW

Target loses 2.9% in pre-market trading as the supermarket group reported quarterly profit down 90% and like-for-like sales below expectations as inflation hits consumption unconstrained.

Lowe’s, the number two US DIY store, gained 3.5% on the other hand in pre-market after saying it expects annual earnings per share at the top of the range indicated above.

VALUES IN EUROPE

In Europe, most of the Stoxx 600 sectors are in the red and the rare gains are in the assets of defensive compartments such as beverages and food (+0.76%).

The banking compartment (-0.91%), which posted one of the strongest rises at the start of the session after the publication of British inflation figures confirming the scenario of a continued rise in rates in Europe, turned around amid widespread caution.

On the CAC 40, Sanofi, one of the heavyweights of the Parisian index, fell by 3.53% after the announcement of the cessation of the amnecestrant development program for the treatment of breast cancer.

In Frankfurt, Uniper dropped 8.39%, the German group having published a half-yearly net loss of 12 billion euros, largely linked to the drop in Russian gas supplies.

On the rise, the Swiss life insurance giant Swiss Life gained 0.27% after a 4% increase in its half-yearly net profit.

Danish brewer Carlsberg advances by 3.96% despite sales below expectations; its chief executive said inflation had no noticeable impact on customer behavior so far.

RATE

Bond yields are supported by the prospect of further rate hikes following the UK inflation data.

Markets are also still expecting a rate hike from the European Central Bank (ECB) of 50 basis points in September.

The yield of the ten-year German Bund took over 11 points to 1.0950% and that of the two-year, even more sensitive to changes in key rates, jumped 15.8 points to 0.734%.

Those of two-year and ten-year US Treasury bills are up 7.2 points to 3.324% and six points to 2.884% respectively, while markets currently estimate the probability of a rent hike at 57.5%. silver limited to 50 basis points, against 42.5% for an increase of three quarters of a point, according to the barometer FedWatch.

CHANGES

The dollar gains 0.23% against other major currencies before the Fed’s “minutes”, after having already gained 2% since last week.

The euro, down 0.14%, is trading at 1.0153 dollars.

The New Zealand dollar gained as much as 0.6% after the country’s central bank raised its key rate by 50 basis points to 3.00%, while hinting that other increases could follow.

The British pound is also appreciating after the monthly UK inflation figures.

OIL

Oil prices continue to fall, close to the six-month lows recorded on Tuesday, still affected by fears of a recession which could weigh on global demand and which overshadows the announcement by the American Petroleum Institute (API) of the decline in crude and fuel inventories last week in the United States.

The barrel of Brent yields 0.41% to 91.96 dollars a barrel and that of American light crude (West Texas Intermediate, WTI) 0.1% to 86.44 dollars.

(Written by Claude Chendjou, edited by Marc Angrand)

Copyright © 2022 Thomson Reuters



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