by Claude Chendjou
PARIS (Reuters) – European stock markets ended down on Friday and Wall Street was also in the red at mid-session, the American indices consolidating after their recent records, while in Europe political risk prevails with uncertainty linked to the legislative elections in France.
In Paris, the CAC 40 ended down 2.66% at 7,503.27 points. The British Footsie lost 0.21% and the German Dax lost 1.34%.
The EuroStoxx 50 index fell by 1.95% and the FTSEurofirst 300 by 0.91%. The Stoxx 600, weighed down by the banking (-2.17%) and automobile (-2.18%) sectors, ended down 0.97%.
At the close in Europe, the Dow Jones fell by 0.30%, the Standard & Poor’s 500 by 0.27% and the Nasdaq by 0.16%, the latter two indices having reached closing records on Thursday for a fourth consecutive session.
In the euro zone, the political crisis and financial turbulence in France, born from the rout of Emmanuel Macron’s party in the European elections, has caught the attention of investors while the left, united under the label the “New Popular Front “, unveiled a program of “rupture”, while on the far right Jordan Bardella targeted the “engineers of chaos”, pretending to ignore the current presidential majority.
The prospect of a victory for the extreme groups on June 30 and July 7 resulted in an increase in the yield gap between French and German ten-year bonds, which rose to a seven-year high, at more than of 82 basis points.
Asked to say that if the European Central Bank (ECB) could come to the aid of France with recourse to the institution’s emergency bond purchase program in order to avoid a risk of fragmentation within the zone euro, Christine Lagarde avoided the subject.
“A big difference in European rate levels compared to past situations risks being the crossing of French rates with Portuguese and Spanish rates,” warns Matthieu Bailly, president and deputy CEO of Octo AM, who sees this crossing perhaps take place at the end of June.
RATE
On the bond market, the yield on the ten-year German Bund ended down 13.5 basis points (bps), at 2.36%, while its French equivalent remained practically unchanged at 3.1407%. The spread between these two bonds rose to more than 82 bps, up almost ten points, with many rate strategists highlighting the parallel with the situation on the sovereign debt crisis which hit Europe from from 2009.
In the United States, the yield on ten-year US Treasury bonds fell by 2.9 basis points, to 4.217%, several indicators during the week having shown a slowdown in inflationary pressures despite the downward revision of inflation projections. the Fed on reducing its rates.
CHANGES
The euro is set to record its biggest weekly decline (-1.05%) against the dollar in two months, due to fears that a new government will worsen France’s budgetary situation. The European currency is trading at 1.0694 dollars (-0.38%).
“At both ends of the French political spectrum, the parties campaigning are fiscally expansionist parties,” notes Karl Schamotta, chief market strategist at Corpay.
The weakness of the euro contributed to pushing up the dollar, whose index gained 0.31% against a basket of six international currencies, after reaching its highest level since May 2.
The yen fell to its lowest level in more than a month on Friday, at 158.25 against the dollar, as the Bank of Japan (BoJ) left its key rates unchanged and announced that it would present a detailed recovery plan in July. reduction of its balance sheet.
VALUES IN EUROPE
Atos jumped 14.58% after announcing that it had received a non-binding letter of offer from the French State for the acquisition of its strategic activities.
British property manufacturer Bellway fell 4.41% after Crest Nicholson (+13.72%) rejected a revised takeover offer of 650 million pounds.
H&M rose 2.42%, with UBS moving from “neutral” to “buy” on the Swedish ready-to-wear group.
TODAY’S INDICATORS
The morale of American households has deteriorated since the beginning of June, with a confidence index at 65.6, according to the first results of the monthly survey from the University of Michigan.
The consumer price index in France, harmonized according to European standards (HICP), increased by 2.6% over one year in May after a “flash” estimate of 2.7% , according to INSEE data.
OIL
Crude demand forecasts for this year from the International Energy Agency (IEA), the US Energy Information Agency (EIA) and the Organization of the Petroleum Exporting Countries (OPEC) ) are driving the oil market which is on track to experience its best weekly performance in four months.
Brent rose 0.1% to $82.67 per barrel and American light crude (West Texas Intermediate, WTI) rose 0.18% to $78.48.
The two oil benchmarks could gain nearly 4% over the week as a whole.
(Written by Claude Chendjou, edited by Bertrand Boucey)
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