by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to fall on Thursday and European stock markets also fell mid-session as interest rate fears, combined with the health situation in China and a further deterioration in manufacturing activity in euro zone do not encourage risk taking despite four consecutive sessions in the red of the equity markets.
At the start of September, New York index futures signal an opening on Wall Street down 0.46% for the Dow Jones, 0.51% for the Standard & Poor’s 500 and 0.74 % for Nasdaq.
In Paris, the CAC 40 fell by 1.3% to 6,045.67 around 11:30 GMT. In Frankfurt, the Dax dropped 1.17% and in London, the FTSE lost 1.3%.
The pan-European FTSEurofirst 300 index fell by 1.32% and the EuroStoxx 50 in the euro zone by 1.22%. The Stoxx 600, at a seven-week low, fell 1.39%.
Equity markets, shaken since last Friday by the warning of Jerome Powell, the chairman of the American Federal Reserve (Fed), that interest rates should be expected to rise for “some time” continue to show caution, with investors betting on a 75 basis point rise in the cost of credit this month in both the euro zone and the United States.
In addition to fears about rates, there are fears about the economic situation, with manufacturing activity in the euro zone posting a further contraction in August (49.6 after 49.8 in July) due to weak demand against a backdrop of high inflation, show the final results of the S&P Global surveys of purchasing managers.
In the UK, manufacturing activity fell to 47.3 in August, the lowest since May 2020, after 52.1 in July.
“The economic situation in the Eurozone continues to deteriorate ahead of the European Central Bank (ECB) meeting, with clear signs of slowing growth due to soaring energy prices linked to the conflict in Ukraine”, underline in a note the strategists of Morgan Stanley.
In today’s statistics, the only good news came from the surprise rise in July (+1.9% compared to June) in retail sales in Germany, while the unemployment rate in the euro zone came out in July at 6.6% as expected.
Elsewhere in the world, notably in China, manufacturing activity contracted for the first time in three months in August under the effect of weakening demand with a manufacturing PMI index calculated by Caixin/Markit at 49, 5 after 50.4 in July.
But the main concern from China concerns the city of Chengdu, which announced containment measures affecting 21.2 million inhabitants as part of the fight against the COVID-19 epidemic.
Nvidia and Advanced Micro Devices (AMD) fell 5.3% and 3.6% respectively in the forecourt, the United States having asked the two groups to suspend the sale of some of their chips dedicated to artificial intelligence at China. In their wake, Seagate Technology Holdings, Micron, Applied Materials and Intel lost 1.3% to 2.8%, while Qualcomm fell 1.7%.
On the pan-European Stoxx 600, none of the main compartments escaped the red, the most significant fall being in the assets of raw materials (-3.59%).
ArcelorMittal yields 5.68%, Rio Tinto 3.07% and Glencore 6.96%.
In the luxury compartment, particularly exposed to China, Hermès dropped 1.72%, LVMH 2.02% and Kering 2.00%.
In business news, Pernod Ricard is up 1.17% on better-than-expected annual results, while Lufthansa is down 2.97% after the announcement of the cancellation of 800 flights on Friday and in the wake of the fall in the transport and leisure sector index (-2.72%).
The British consumer goods group Reckitt Benckiser fell 4.75% in reaction to the announcement of the departure at the end of September of its managing director Laxman Narasimhan.
RATE
The revised expectations for a rate hike by the ECB next week is leading to a significant rise in government bond yields in the region.
That of the ten-year German Bund gained nearly six basis points to 1.595%, while its Italian equivalent of the same maturity, up 8.2 points, traded at 3.964% and exceeded the 4% threshold in the session. for the first time since mid-June. The yield difference (“spread”) between these two bonds widened at the same time to 243.20 points, the highest level since July 29.
In the United States, the yield on two-year Treasuries rose to 3.52%, the highest since 2007, before falling to 3.48%, while the ten-year took 6.5 points to 3.19% .
EXCHANGES The dollar, up 0.34% against a basket of benchmark currencies, is driven by the prospect of a sustained rise in interest rates in the United States.
Against the yen, it recorded its highest since 1988, at 139.69, the policy of the Bank of Japan being considered more accommodating than that of the Fed.
The euro remains above parity with the dollar at 1.001 despite a decline of 0.47%.
OIL
Oil prices are affected by the health situation in China which is aggravating fears related to inflation and interest rates, which could weigh on demand.
The barrel of Brent fell 1.93% to 93.79 dollars and that of American light crude (West Texas Intermediate, WTI) 1.84% to 87.9 dollars a barrel.
(Written by Claude Chendjou, edited by Sophie Louet)
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