by Diana Mandia
(Reuters) – European stock markets ended higher on Wednesday, driven by rather encouraging corporate results while investors remain largely confident in an imminent cut in interest rates from major central banks.
In Paris, the CAC 40 gained 0.62% to finish at a record 8,137.58 points. The British Footsie gained 0.31% while the German Dax lost 0.02%, weighed down by Volkswagen’s sales outlook for 2024.
The EuroStoxx 50 index gained 0.36%, the FTSEurofirst 300 0.18% and the Stoxx 600 0.16%.
Company results considered solid, particularly in the distribution sector, allowed European stock markets to maintain record levels on Wednesday during a session without major economic indicators, and while persistent inflation in the United States does not appear to undermine expectations of a rate cut by the Federal Reserve in June too much.
If February was the second consecutive month of rising inflation in the United States, the composition of the report published Tuesday remains consistent with a disinflationary trend, Wells Fargo said Wednesday in a note, in which the American bank joins its main counterparts to anticipate the first rate cut by the Fed in June.
Operators, however, reduced their bets on a Fed rate cut by June to 65% on Wednesday, compared to 70% on Tuesday, according to the CME Group’s FedWatch.
A new set of economic data due later this week in the United States, including producer prices and retail sales on Thursday, should provide more clues about the Fed’s plans ahead of the central bank’s meeting. March 20th.
In the Eurozone, investors also expect the European Central Bank (ECB) to cut rates in the coming months, with reductions in the range of 90 to 95 basis points (bps) in 2024, d ‘as much as the rise in borrowing costs is increasingly penalizing the bloc’s economy.
In January, industrial production in the euro zone fell by 3.2% over one month, much more than expected since analysts were expecting a decline of 1.5%, Eurostat said on Wednesday.
According to Citigroup analysts, the Bank of England (BoE) should start lowering its key rates in June and no longer in August.
VALUES
On the Stoxx 600, the distribution sector was the best performer on Wednesday with an increase of 3.59%, following an 18.9% jump in the action of online fashion retailer Zalando, which announced a profit above expectations in the fourth quarter and a share buyback program.
Inditex, the owner of the ready-to-wear giant Zara, increased by 7.7% after reporting a 30.3% increase in its net profit in 2023.
Volkswagen fell 4.4% after disappointing its sales forecasts for 2024.
E.ON gained 6% as Europe’s largest energy network operator increased its five-year investment target to 42 billion euros and provided profit forecasts for 2024 that beat expectations. This helped the utilities sector grow by 0.81%.
In Paris, Vallourec jumped 7.4%, the biggest increase in the SBF 120, after the announcement by ArcelorMittal of a stake in the capital of the French manufacturer of seamless steel tubes.
BNP Paribas, which said on Wednesday it would increase its cost-cutting efforts by 400 million euros, gained 2%.
A WALL STREET
At closing time in Europe, the Dow Jones gained 0.39%, while the Standard & Poor’s 500 lost 0.11% after Tuesday’s rally and the Nasdaq Composite 0.53%.
The latter, with a strong technological component, is suffering from the rise in US Treasury yields, before the economic indicators to come this week.
Tesla shares fell 3.09% after Wells Fargo lowered its recommendation to “underweight”.
CHANGES
The dollar fell (-0.12%) against a basket of reference currencies, while the euro gained 0.21% to 1.0947 dollars. The latter benefits from Wednesday’s announcement of highly anticipated changes to the ECB’s operational framework, which aims to gently reduce the liquidity available to banks so as not to disrupt the financial system or lending.
In cryptocurrencies, bitcoin rose 2.78% to $73,045.06 after reaching its third consecutive record earlier in the day at $73,678.
RATE
Bond yields in the euro zone rose again on Wednesday after the publication of inflation in the United States the day before.
The yield on the German ten-year rose by almost 3 basis points to 2.355%, and that of the two-year rate increased by almost 4 bps to 2.8589%.
The yield on the 10-year Italian bond is at 3.584%, and ended down around 2 bps.
This on Wednesday narrowed the yield spread between benchmark German and Italian government bonds, a measure of sovereign risk on peripheral euro zone debt, to 122 basis points, its lowest level since mid- January 2022.
The American bond markets are also progressing: the ten-year bond market gains 4 basis points to 4.19%, and the two-year bond market gains around 2 bp to 4.6177%.
OIL
Oil prices rose on Wednesday, supported by a larger-than-expected drop in U.S. crude inventories and fears of supply disruption following Ukrainian attacks on Russian refineries, the all against a backdrop of signs of strong demand.
Brent rose 2.17% to 83.7 dollars per barrel, with light American crude (West Texas Intermediate, WTI) increasing 2.37% to 79.61 dollars.
(Written by Diana Mandiá, edited by Blandine Hénault)
Copyright © 2024 Thomson Reuters