Market: Downturn in sight in Europe with uncertainties about banks


by Laetitia Volga

PARIS (Reuters) – Major European stock markets are expected to open lower on Friday as concerns over the stability of the banking system resurface after major central banks decided to hike rates in recent days.

Futures contracts on indices give a decline of 0.6% for the CAC 40 in Paris, 0.29% for the Dax in Frankfurt, 0.53% for the FTSE in London and 0.41% for the Euro Stoxx 50.

Some of the largest central banks in the world, those of the United States, the United Kingdom or the European Union in particular, have increased their interest rates since last week, by 25 or 50 basis points, despite the turmoil in the banking sector.

Traders remain on their toes after recent tensions, driven in part by the Federal Reserve’s rapid rate hike cycle.

The latter, however, hinted that it could raise its rates just one more time this year, a prospect that allowed most European markets to stabilize on Thursday.

Investors are pricing a nearly 70% chance the Fed won’t touch rates in May, according to the FedWatch barometer, and they mostly expect a cut in US rates by the end of the year, although that Jerome Powell said otherwise.

US Treasury Secretary Janet Yellen said on Thursday that she was ready to take further steps to ensure the safety of Americans’ bank deposits, a day after she dismissed the idea of ​​​​an extension of the deposit guarantee to the beyond the current limit of $250,000.

“The United States is still wondering what it’s going to do about uninsured deposits…that’s partly given us a rollercoaster ride on the stock markets,” said Shane Oliver, chief economist. at AMP.

On the macroeconomic agenda, the first results of the monthly PMI surveys by S&P Global are expected in the morning in Europe for the month of March.

AT WALL STREET

After a jagged session, the New York Stock Exchange ended in the green on Thursday, supported at the end of the day by the words of Janet Yellen.

The Dow Jones index gained 0.23%, or 75.14 points, to 32,105.25 points, the S&P-500 gained 11.75 points, or 0.30%, to 3,948.72 points and the Nasdaq Composite advanced 117.44 points (1.01%) to 11,787.40 points.

All three major Wall Street indexes also benefited from the prospect of an eventual Fed pause in the interest rate hike campaign.

The easing of the bond market, with in particular the fall of 18 basis points in the yields of two-year Treasuries, supported growth stocks and by extension the Nasdaq.

Among the major sectors of the S&P-500, only two – technology (+1.65%) and communication services (+1.83%) – ended the session in the green.

Side values, Accenture jumped 7.3% after announcing the project to reduce its workforce by about 2.5%. Coinbase Global fell 14.1% after the market regulator threatened to take legal action against the cryptocurrency specialist.

IN ASIA

The Tokyo Stock Exchange fell 0.13% as the yen’s rise sparked fears for the earnings of export-oriented companies like automakers Toyota and Honda.

Toshiba gained 4.2% after its board accepted a $15.2 billion takeover bid from a consortium led by investment fund Japan Industrial Partners.

In China, market sentiment has been affected by tensions between Beijing and Washington, with many US lawmakers convinced of the need to ban the Chinese app Tiktok in the United States.

After making net purchases for nine consecutive sessions, foreign investors are turning away from the Chinese market on the Stock Connect program between Hong Kong, Shanghai and Shenzhen.

The CSI 300 index fell by 0.3% and the Shanghai SSE Composite by 0.64%.

RATES/EXCHANGES

The prospect of a moderation in monetary tightening in the United States no longer offers support to the US government bond market. The yield on ten-year Treasuries stabilized at 3.4134%, after falling 20 basis points over the previous two sessions.

Its German equivalent is at 2.186%, close to its level the previous day at the close.

The dollar index, which measures the fluctuations of the greenback against a reference basket, is unchanged.

The euro is displayed at 1.0828.

OIL

Oil prices are up slightly: Brent rose 0.47% to 76.27 dollars a barrel and American light crude (West Texas Intermediate, WTI) 0.53% to 70.33 dollars.

(Laetitia Volga, edited by Jean-Stéphane Brosse and Kate Entringer)

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