by Claude Chendjou
PARIS (Reuters) – Wall Street is expected in disorder on Friday, while European stock markets are moving up slightly at mid-session, mainly supported by defensive stocks, in a context of caution linked to the unexpected contraction of the private sector in the zone. euro and the tightening of the European Central Bank (ECB) in the face of record inflation.
New York index futures are signaling a Wall Street open up 0.10% for the Dow Jones, while the Standard & Poor’s 500 could fall 0.30% and the Nasdaq 0.50%.
In Paris, the CAC 40 took 0.19% to 6,213.14 around 11:30 GMT. In Frankfurt, the Dax advances by 0.28% and in London, the FTSE gains 0.23%. The Milan Stock Exchange gained 0.2% despite President Sergio Mattarella’s decision to dissolve Parliament the day after the breakup of Mario Draghi’s coalition, which had governed since February 2021.
The pan-European FTSEurofirst 300 index rose 0.39%, the Eurozone EuroStoxx 50 0.17% and the Stoxx 600 0.41%.
Over the week as a whole, the Paris index has gained 2.87% at this stage and the pan-European Stoxx 600 2.93%, thanks in particular to the good results of several large companies despite an unfavorable macroeconomic context.
Driven by accelerating inflation, which pushed consumers to cut back on spending, eurozone private activity contracted unexpectedly in July with the composite PMI falling to 49 .4 in first estimate after 52.0 in June and a Reuters consensus at 51.0.
In the UK, growth in private activity fell to the lowest in 17 months with a “flash” composite PMI index down to 52.8.
These new economic data reinforce the fears of a recession which have weighed on the markets for months while the monetary tightening of the central banks is accentuated with in particular the ECB which on Thursday raised its rates by half a point and not by a quarter point as she had suggested in June.
On Friday, Peter Kazimir, member of the Governing Council of the ECB, considered possible a further rate hike of 25 or 50 basis points in September, a sustained pace in the face of inflation which should rise further in the short and long term according to a Reuters survey
Some analysts, like those of ING, believe that the acceleration of the rise in ECB rates could be linked to an increased risk of deterioration in the economy, which leaves little time for the institution to to act.
WALL STREET VALUES TO FOLLOW
The Snap social network fell 28% in pre-market trading after results deemed disappointing and the lack of communication on its forecasts. Meta Platforms, Twitter and Pinterest yield between 2.5% and 6.3%.
VALUES IN EUROPE
In Europe, defensive compartments such as real estate (+3.37%), community services (+0.5%) and beverages and food (0.72%) are among the best progressers .
In values, Publicis, which had already jumped the day before by 5.05% thanks to the raising of its annual forecasts, takes another 1.77% with the change in recommendation from JPMorgan to “overweight” on the value. Its British competitor WPP advances by 0.64%, while the media compartment gains 0.63%.
In the red, Ubisoft lost 2.28% after announcing the postponement of the release of the game “Avatar: Frontier of Pandora” on the occasion of the publication of its turnover for the first quarter.
Danske Bank fell 2.2% and Swiss elevator maker Schindler 5.63% as their annual forecasts were lowered.
Uniper plunges 20.4% despite the announcement of its bailout.
RATE
Bond yields in Europe fell after the data on private activity: that of the ten-year German Bund yielded 17.7 basis points to 1.046% and its French equivalent of the same maturity dropped 17.8 points to 1.637%.
“I think it’s pretty clear that the market is increasingly worried about a recession in the euro zone this winter: activity is already falling off a cliff ahead of a possible shutdown of the Russian gas in winter,” said Michael Brown, market manager at Caxton.
The yield spread (“spread”) between the German and Italian ten-year bonds rose to 247 basis points on Friday, despite the ECB’s announcement on Thursday of a new bond purchase program to limit a excessive widening of the spreads of the countries of the euro zone, the observers pointing out the lack of details and the rather vague conditions of this tool, called Instrument of protection of the transmission (IPT).
In the United States, the yield on Treasury bills was practically stable at 2.817%, after having fallen by around 13 points on Thursday under the effect of the rise in ECB rates and worse than expected American indicators.
CHANGES
The euro, also affected by the latest PMI figures, fell again to 1.0154 dollars (-0.72%).
“The US economy is slowing down, but Europe is slowing down faster. That’s why the forex market continues to be underweight the euro,” said Viraj Patel, macro strategist at Vanda Research.
The dollar advanced 0.12% against a basket of benchmark currencies but could fall 0.83% for the week as a whole, its biggest decline since May 29, with traders estimating just 16, 3% the probability of a 100 basis point rate hike from the US Federal Reserve next week.
OIL
The oil market is affected by the resumption of production in Libya as the outlook for global demand for crude deteriorates.
The barrel of Brent fell by 1.4% to 102.41 dollars and that of American light crude (West Texas Intermediate, WTI) by 1.65% to 94.76 dollars.
NO MAJOR ECONOMIC INDICATOR ON THE JULY 23 AGENDA
(Written by Claude Chendjou, edited by)
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