by Laetitia Volga
PARIS (Reuters) – European stock markets ended higher on Friday, but far from their highs of the day with the decline of Wall Street, the publication of results and political unrest in the United Kingdom.
In Paris, the CAC 40 ended up 0.9% at 5,931.92 points. Britain’s Footsie gained 0.12% and Germany’s Dax advanced 0.67%.
The EuroStoxx 50 index gained 0.57%, the FTSEurofirst 300 ended up 0.6% and the Stoxx 600 gained 0.56%.
At the time of the close in Europe, Wall Street was down 0.83% to 2.15%, after jumping more than 2% the day before thanks to hedges of short positions.
Opening the earnings season, JPMorgan, Morgan Stanley, Citigroup and Wells Fargo reported lower earnings, impacted by their investment banking business and increased provisions to cover possible defaults with the economic downturn.
JPMorgan, the largest US bank by assets, however, did better than the market expected in terms of profit, which allowed it to take 2.38%.
On the other side of the Atlantic, the news was dominated by the political and economic situation in the United Kingdom, where the Minister of Finance left his post at the request of the Prime Minister.
Liz Truss said her government had taken the decision to forego some of the massive tax relief contained in the budget proposal presented at the end of September, which threw the country and the markets into turmoil.
“We remain concerned about the lack of clarity on exactly what is happening. We will have to keep an eye on what the new Chancellor, Jeremy Hunt, says next week,” said Daniela Hathorn, analyst at Capital.com.
The markets also briefly benefited from the statements of Vladimir Putin, announcing during a press conference that there were no plans for a new mobilization of reservists, nor the need to carry out new massive strikes on Ukraine, the most of the targeted targets having been reached according to the Russian president.
EXCHANGES/RATES
The pound fell 1.13% against the dollar and UK bond yields (“gilts”) rose as the UK government’s reversal of part of its tax program disappointed investors who expected more.
“I think the market was expecting almost the entire mini-budget to be cancelled. The announcement of a U-turn just on corporate tax, is a little disappointing,” Michael Brown at Caxton said. “A bit of ‘buy the rumour, sell the news’ probably enters the equation as well.”
Yields in the euro zone ended up, around 2.364% for the ten-year German Bund and 2.963% for its French equivalent.
In the United States, the yield on ten-year Treasury bonds gained more than five basis points to 4.0101% and the dollar index recovered 0.71%, supported by the strong probability that Fed rates will be at new statements of three quarter points next month.
VALUES
The majority of European sectors ended up, first and foremost that of real estate (+3.61%).
Danone gained 0.61% despite announcing its withdrawal from the Russian dairy market, which could result in impairment charges of one billion euros.
Among the biggest declines in the Stoxx 600, Swiss banking software specialist Temenos fell 18.94% after warning on its results that its customers were becoming more cautious in terms of spending.
OIL
Oil prices are down as recession fears and weak demand, particularly in China, outweigh a significant reduction in the OPEC+ production target.
Brent fell 2.56% to 92.15 dollars a barrel and US crude (West Texas Intermediate, WTI) by 3.25% to 86.21 dollars.
THE INDICATORS OF THE DAY
US retail sales were flat in September as high inflation and rapidly rising rates dampened demand for goods.
Household morale has improved more than expected since the beginning of October, according to preliminary results from the University of Michigan survey.
TO BE CONTINUED:
(Written by Laetitia Volga, edited by Tangi Salaün)
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