Market: Equities benefit from a lull, slight relief on the Fed


by Laetitia Volga

PARIS (Reuters) – Wall Street is expected to rise and European stocks advanced mid-session on Friday, with reassuring words from Federal Reserve officials encouraging the rise in equities this weekend despite fears of recession, the contraction of the Chinese economy and disappointing results across the Atlantic. Futures contracts are signaling a gain of 0.52% for the Dow Jones, 0.32% for the Standard & Poor’s-500 and 0.23% for the Nasdaq. In Paris, the CAC 40 0.5% at 5,945.28 around 11:45 GMT. In Frankfurt, the Dax takes 1.58% and in London, the FTSE gains 1%.

The pan-European FTSEurofirst 300 index advanced by 0.88%, the EuroStoxx 50 of the euro zone by 1.05% and the Stoxx 600 by 0.79%. Investors are putting aside fears related to a possible recession and the contraction of the Chinese economy in the second quarter for the moment to favor the latest statements by Christopher Waller, Governor of the Fed, and James Bullard, Chairman of the St. Louis Fed.

The latter, among the most “hawkish” members of the American central bank, favor a further hike in interest rates of 75 basis points at the monetary policy meeting on July 27, not a bigger hike. as feared by investors after the acceleration of inflation in June.

Markets will be watching US retail sales and industrial production numbers ahead of the opening on Wall Street.

“Recession risks have increased since the start of the year,” said Mike Bell at JP Morgan Asset Management. “If there is any sign of consumer disengagement, recession risk will be more accurate.”

WALL STREET VALUES TO FOLLOW

After disappointing results from JPMorgan Chase and Morgan Stanley on Thursday, Wells Fargo also posted a bigger-than-expected decline in quarterly profit. The US bank was down 3% in pre-opening trading.

The world’s largest asset management firm BlackRock also reported a bigger-than-expected decline in quarterly profit.

Citi’s second quarter results are also expected.

VALUES IN EUROPE

In Europe, the luxury groups Burberry and Richemont lost around 7% after the publication of their quarterly turnover, penalized by the confinements in China, and the sharper than expected drop in the gross domestic product of the second world economy on the April-June period.

French competitors Hermès, LVMH and Kering lost 0.96% to 3.01%.

Mining giant Rio Tinto lost 1.88% after warning that the Western Australian state’s labor shortage and rising inflation would hit its second-half profits.

On the rise, carmaker Aston Martin jumped 21.49% after announcing that the sovereign fund of Saudi Arabia would become its second largest shareholder with a stake of nearly 17% as part of a capital increase.

RATE

Yields on US Treasury bonds fell to 2.9429% for ten-year securities and 3.1201% for two-year ones.

If the two-ten-year segment of the yield curve remains inverted, the gap between the two maturities has narrowed to 18 basis points, against more than 27 points at the start of the day on Thursday, its highest level since September 2000 according to Refinitiv data.

In Europe, the ten-year German fell to 1.153%. Its Italian equivalent yields five basis points, to 3.36%, after jumping nearly 15 basis points on Thursday after the resignation of the President of the Council, Mario Draghi, rejected by the President of the Republic.

Peter McCallum, strategist at Mizuho, ​​said the latest developments put Italy in “no man’s land”, with no word on whether a new vote of confidence could be considered.

“Until then, we are in uncertainty,” added the strategist.

CHANGES

The greenback fell slightly against a benchmark basket (-0.28%) after hitting a 20-year high the day before, favored by expectations of a rate hike in the United States and its status as a safe haven asset.

The euro rises around 1.006 dollars.

OIL

The oil market is up after a U.S. official told Reuters that Saudi Arabia is not expected to increase oil production anytime soon.

The rise in prices is also based on the hope of less sustained rate hikes in the United States.

Brent rose 1.97% to 101.05 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.46% to 97.18 dollars.

(Written by Laetitia Volga, edited by)

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