by Laetitia Volga
PARIS (Reuters) – European stocks closed sharply higher on Tuesday, helped by the rise on Wall Street and expectations for the Federal Reserve’s decisions, even if the London Footsie finished stable in reaction to the soaring pound. sterling, bolstered by the appointment of Rishi Sunak as British Prime Minister.
In Paris, the CAC 40 gained 1.94% to 6,250.55 points, the highest since mid-September, and in Frankfurt, the German Dax advanced 0.94%. The British Footsie lost 0.01%.
The EuroStoxx 50 index gained 1.64%, the FTSEurofirst 300 advanced 1.45% and the Stoxx 600 1.44%.
After initial hesitant exchanges, punctuated by corporate results, the main Wall Street indices were moving in the green at the time of the European close, the publication of macroeconomic statistics below expectations reinforcing expectations of a possible slowdown in price increases. Fed rate from December.
US single-family home prices fell 0.9% seasonally-adjusted in August, according to the monthly S&P/Case-Shiller survey, and US consumer confidence fell more than expected .
The decline in bond yields, which deepened after its data, also offers support for large growth stocks, which will publish their results this week.
The Dow Jones gained 0.81%, the Standard & Poor’s 500 1.27% and the Nasdaq 1.94%.
As for the results in Europe, Air Liquide gained 6.67%, supported by a turnover above expectations, but Rémy Cointreau lost 4.68% due to prospects deemed cautious.
Besides the pound, the 6.83% fall of HSBC in London slowed down the FTSE 100. The bank announced a 42% drop in its quarterly profit and the unexpected appointment of Georges Elhedery as chief financial officer.
In Zurich, UBS took 7.73% while SAP gained 6.47% in Frankfurt after their results.
Yields on government bonds in the eurozone fell. The drop in natural gas prices, weak economic indicators and the return to calm in British markets are fueling hopes that the European Central Bank will slow the pace of its monetary tightening after the 75 basis point hike expected on Thursday.
The ten-year German ended the session around 2.17% against 2.334% at the close on Monday and its French equivalent at 2.68%, the lowest for almost three weeks.
In the United States, the yield on Treasuries with the same maturity lost more than 15 basis points, to 4.0813%.
On the foreign exchange market, the pound sterling takes 1.67% against the dollar and 0.78% against the single European currency, traders welcoming the appointment as British Prime Minister of the former finance minister and man of Rishi Sunak business.
“Every new leader tends to have a grace period (…) We assume that with his background Rishi Sunak has a better understanding of the markets than Liz Truss and that he will allow Jeremy Hunt (the Minister of Finance) to pursue the ‘austerity budget’ that we will have on October 31. This will please the market,” said Jordan Rochester, strategist at Nomura.
Against a basket of benchmark currencies, the dollar lost 1.01%, penalized by expectations of a possible slowdown in monetary tightening by the Fed from December.
The euro took advantage of this to rise to $0.9954, posting a peak since October 5.
The oil market took advantage of the decline in the dollar to start rising again: Brent rose 0.16% to 93.41 dollars a barrel and American light crude (West Texas Intermediate, WTI) gained 0.64% to 85.12 dollars.
(Laetitia Volga, edited by Bertrand Boucey)
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