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(Updated with futures contract on the CAC 40, closing of the Japanese Stock Exchange, opening of the bond market in Europe)
- European indices should open in the red
- ECB to hike rates in July and September
- US inflation expected at 8.3% over one year
by Laetitia Volga
PARIS, June 10 (Reuters) – The main European stock markets are expected to fall on Friday at the opening the day after the announcements of the European Central Bank, which confirmed the tightening of its monetary policy, and before the long-awaited publication of the figures of US inflation.
Futures contracts suggest a decline of 0.55% for the Paris CAC 40 .FCHI , 0.54% for the Dax in Frankfurt .GDAXI , 0.65% for the FTSE in London .FTSE , and 0. 56% for the EuroStoxx 50.
The main indices of the euro zone widened their losses on Thursday after the announcement by the ECB of its intention to end its policy of buying bonds on the markets on July 1 and to raise its rates in July by a quarter of a point, specifying that it did not rule out a larger increase in September if inflation does not slow down.
Read also: The ECB stops its purchases and prepares a first rate hike for July
“Global equities came under pressure after the ECB presented its guidance, and Christine Lagarde, the institution’s chair, highlighted upside inflation risks,” ANZ analysts said.
“And with energy prices still high, it is not yet clear that inflation has peaked,” they added.
Deutsche Bank now expects the ECB to make two rate hikes of 50 basis points this year (in September and October) and the deposit rate to be at 1% by the end of December.
The other big meeting of the week for the markets will take place at 12:30 GMT with the publication by the Labor Department of the monthly consumer price figures in the United States, which the Reuters consensus expects to be up by 8.3 % on an annual basis, as in April.
The “core CPI” index should return to 5.9% year on year according to the consensus, which would mark a slowdown compared to +6.2% the previous month but a pace still well above the Fed’s objective .
VALUES TO FOLLOW: Stock market: stocks to follow in Paris and Europe
AT WALL STREET
The New York Stock Exchange ended lower on Thursday as investors were cautious ahead of the May inflation release.
The Dow Jones Index .DJI fell 1.94% to 32,272.79 points, the S&P-500 .SPX lost 2.38% to 4,017.82 points and the Nasdaq Composite .IXIC fell 2.75% to 11,754.23 points.
All eleven major sectors of the S&P 500 ended in the red, with the communications services sector .SPLRCL (-2.75%) and the technology sector .SPLRCT (-2.72%) posting the biggest declines.
Apple AAPL.O and Amazon AMZN.O fell 3.6% and 4.15% respectively, contributing significantly to the declines in the S&P-500 and Nasdaq.
Adding to the jitters, the ten-year US government bond yield US10YT=RR climbed to its highest level in a month at 3.073%.
Index futures so far suggest a slight gain at the open.
IN ASIA
After five consecutive sessions in the green, the Nikkei .N225 index in Tokyo lost 1.49%, below the threshold of 28,000 points, in the wake of Wall Street.
Conversely, the trend is positive in China where the equity markets are benefiting from the significant presence of foreign investors. The CSI 300 .CSI300 is up 1.3% and the Shanghai SSE .SSEC is up 1.27%.
CHANGES
The “dollar index”, which measures the variations of the American currency against a basket of other reference currencies, is stable. .DXY
The euro is picking up some color against the dollar after falling 0.93% the day before and reaching a low of more than two weeks at 1.0609 in reaction to the ECB’s announcements.
While the Frankfurt institution has pledged to raise rates for at least the next two meetings, the extent of the rise in September is uncertain and Christine Lagarde spoke of the risk of fragmentation in eurozone bond markets, c That is to say the divergence in financing costs between the most indebted countries, such as Italy, and the countries deemed the safest, such as Germany.
Read also:The ECB will deploy a new instrument if necessary to avoid fragmentation-Lagarde
“We know that quantitative easing is fading, but they themselves started to float the idea of a special contingency plan to tackle the risk of fragmentation. The market was hoping for a bit more clarity The absence of any detail is a disappointment,” Huw Roberts, head of research at Quant Insight, said Thursday.
RATE
On the bond market, the yield of ten-year Treasuries US10YT=RR is stable at 3.0456%.
Following the announcements from the ECB, the ten-year German Bund yield DE10YT=RR climbed to 1.470% on Thursday, its highest level in eight years.
In early trade in Europe, the ten-year German Bund yield DE10YT=RR fell modestly to 1.427% after climbing to 1.470% on Thursday, its highest level in eight years, following announcements from the ECB.
Its Italian equivalent gains more than two basis points to 3.733% after jumping 22 basis points on Thursday and reaching a peak since October 2018, at 3.78%.
OIL
Oil prices are down moderately as fears over new COVID-19 measures in China outweigh strong demand from the United States.
Read also:
Coronavirus/China-New massive screening campaign in Shanghai
China-Exports beat expectations in May after restrictions eased
Brent LCOc1 fell 0.26% to $122.77 a barrel and US light crude (West Texas Intermediate, WTI) CLc1 fell 0.22% to $121.23.
PRINCIPAUX INDICATEURS ÉCONOMIQUES À L'AGENDA DU 10 JUIN
PAYS GMT INDICATEUR PÉRIODE CONSENSUS PRÉCÉDENT
USA 12h30 Prix à la consommation mai +0,7% +0,3%
- sur un an +8,3% +8,3%
USA 14h00 Indice de confiance du juin 58,0 58,4
Michigan (1re estimation)
(édité par Kate Entringer)
((Rédaction de Paris; +33 1 49 49 50 00;))
((Les valeurs à suivre à la Bourse de Paris et en Europe WATCH/LFR ))