by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to fall on Friday and European stocks are trading in the red at mid-session, as markets continue to be extra cautious in the wake of the mixed minutes of the last Federal Reserve monetary policy meeting. America as inflation and recessionary risks mount following record high producer prices in Germany in July.
Futures on New York indices signal an opening on Wall Street down 0.8% for the Dow Jones, 1% for the Standard & Poor’s 500 and 1.2% for the Nasdaq.
In Paris, the CAC 40 fell 0.54% to 6,522.16 points around 11:10 GMT. In Frankfurt, the Dax lost 0.73% and in London, the FTSE lost 0.07%.
The pan-European FTSEurofirst 300 index fell by 0.4%, the EuroStoxx 50 of the euro zone by 0.73% and the Stoxx 600 by 0.32%.
Over the week as a whole, the Parisian index fell by 0.46% and the pan-European Stoxx 600 fell by 0.45%.
The “minutes” of the Fed, published on Wednesday evening, gave rise to contrasting interpretations, with some analysts considering that the officials of the American central bank were “hawkish” and others, on the contrary, that they paved the way for less aggressive tightening than expected.
Since then, several Fed officials have again expressed their views on the rate hike planned for September, without however reassuring the markets on the pace of the rise in the cost of credit. The speech next week by Jerome Powell, the Fed Chairman, at the annual conference of central bankers in Jackson Hole, may provide investors with new elements on the trajectory of rates.
In the meantime, inflation and fears of a recession, which have weighed on the equity markets since the start of the year, have made a comeback thanks to the publication on Friday of producer prices in Germany. They posted their biggest month-on-month (+5.3%) and year-on-year (+37.2%) increases last month as energy costs continue to soar with the war in Ukraine.
The price of natural gas is trading Friday in session around 245 euros per megawatt hour after touching Thursday a record level closing at 241 euros. In its monthly report, the German Ministry of Finance estimated on Friday that the country’s economic outlook is now noticeably gloomy.
In Britain, household sentiment has deteriorated since the beginning of the month to -44, a low since at least 1974, according to the GfK index released on Friday.
In Europe, the most notable increases are almost exclusively in defensive compartments such as health (+1.02%) or food and beverages (+0.29%).
Economically sensitive sectors such as tourism (-1.9%) and automotive (-1.89%) are among the major declines.
On the CAC 40, Renault dropped 2.21% and Stellantis 2.13%, while Sodexo (-0.97%) suffered from the lowering of Jefferies’ recommendation to “hold” on the value.
Elsewhere in Europe, Just Eat Takeaway jumped 38.62% after the announcement of the sale of its stake in iFood to Prosus (+0.08%).
RATE
Bond yields in Europe rise after the publication of producer prices in Germany: that of the 10-year Bund, a benchmark for the euro zone, takes almost ten basis points, to 1.189%, to a peak of around a month .
According to Viraj Patel, macroeconomic strategist at Vanda Research, the German statistics of the day “reinforce fears of stagflation in Europe and the bond market fears persistent inflation”.
Money markets are now 100% expecting a 50 basis point rate hike from the European Central Bank (ECB) in September versus a 50% chance in early August.
In the United States, the yield on ten-year Treasuries rose about five points to 2.926%, supported by the latest statements from Fed officials on the need for further rate hikes.
CHANGES
On the currency market, the dollar appreciated by 0.43% against a basket of reference currencies, after hitting a peak in session since July 18. The greenback, which is gaining 1.9% for the week as a whole at this stage, is heading for its best weekly performance in ten weeks.
The euro, down 0.33%, is trading at 1.0055 dollars. The single European currency, which lost about 1.7% over the week, could show its biggest weekly drop since July 8.
The pound, down 0.78% at $1.1837, failed to benefit from news of an unexpected rise in UK retail sales in July.
OIL
Oil prices are falling again after two consecutive sessions of increases, victims of the strength of the dollar and fears of a recession which could weigh on demand for crude.
The barrel of Brent fell 2.06% to 94.6 dollars and that of American light crude (West Texas Intermediate, WTI) 1.99% to 88.7 dollars.
(Written by Claude Chendjou, edited by Kate Entringer)
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