PARIS (Reuters) – The main European stock markets are expected to rise at the opening on Thursday, in a context of easing bond yields after encouraging employment figures in the United States and a sharp drop in oil prices.
Futures contracts suggest an opening increase of 0.25% for the Parisian CAC 40, compared to 0.35% for the FTSE in London, 0.27% for the Dax in Frankfurt, and 0.32% for the EuroStoxx 50.
The massive sales of US sovereign securities, which had brought yields on 10- and 30-year securities to a record level since 2007, came to an end on Wednesday during a session of rare volatility which saw yields lose up to at 18 basis points, after the publication of job creation data by the private ADP. These in fact showed a slowdown in the creation of new positions, surprising the consensus with their weakness.
While labor markets remain one of the main factors of inflation in the United States, and their resistance to rate increases by the Federal Reserve had been surprising until now, this figure provides reassurance about the transmission of monetary policy. to the economy, and removes the risks that the Fed will further tighten financial conditions to bring inflation under control.
Furthermore, a barrel of oil lost more than five dollars during Wednesday’s session, further encouraging investors.
Crude oil has in fact risen sharply in recent months, raising fears of a further rise in energy prices which would spread to the consumer basket. Referring to the significant volatility of sovereign markets and the increasing sensitivity of investors to data, Rabobank strategists summarize that “all kinds of things started to break (on Wednesday) in a fragile global financial architecture: if a single number of a third-order data series can push bond yields down 18 basis points in one session, what impact will a surprise on the jobs report have?”
A WALL STREET
The New York Stock Exchange ended higher on Wednesday, as a report showed that the American private sector created fewer jobs than expected in September, amid fears over the Fed’s rate policy.
The Dow Jones index gained 0.39%, or 127.17 points, to 33,129.55 points. The broader S&P-500 gained 34.30 points, or 0.81%, to 4,263.75 points. The Nasdaq Composite advanced 176.54 points (1.35%) to 13,236.01 points.
IN ASIA
Japanese markets advanced, supported by falling bond yields, after hitting a four-month low. The Nikkei index gained 1.80% to 31,075.36 points and the broader Topix gained 1.99% to 2,263.09 points.
Semiconductor test equipment manufacturer Advantest was the main contributor to the Nikkei’s advance, gaining 5.11%. Tokyo Electron rose 2.04%.
Chinese markets are closed for a public holiday week, with the exception of Hong Kong indices, which are rising with the easing of American yields. The Hong Kong Hang Seng index 0.35%, rebounding from an eleven-month low.
CHANGES
The employment report puts pressure on the dollar, supported until now by expectations of higher rates for the Fed, and which is declining against most currencies. The dollar fell 0.13% against a basket of reference currencies, while the euro gained 0.09% to 1.0512 dollars, and the pound sterling 0.19% to 1.2151 dollars.
In Asia, the yen strengthened by 0.3% to 148.68 yen per dollar, while the Australian dollar gained 0.54% to 0.6357 dollars.
RATE
Selling in the Treasuries market has paused since the ADP report, providing some respite to yields, which nevertheless remain less than 10 bps from their record level since 2007.
The ten-year Treasury yield fell 1.2 bps to 4.7227%, while the two-year rate remained stable at 5.0434%.
The German ten-year yield fell by 1.3 bp to 2.926%, while that of the two-year rate eroded by 1.7 bp to 3.174%.
OIL
Oil is timidly rising again after its tumble on Wednesday, justified by demand for diesel in the United States at its lowest in 22 years.
Brent advanced 0.54% to $86.27 per barrel, with American light crude (West Texas Intermediate, WTI) gaining 0.47% to $84.62.
(Corentin Chappron, edited by Jean-Stéphane Brosse and Kate Entringer)
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