THE MAIN EUROPEAN STOCK EXCHANGES EXPECTED TO RISE AT THE BEGINNING OF THE SESSION
PARIS (Reuters) – The main European stock markets are expected to rise on Friday after statements by two of the main American monetary policymakers downplaying the risk of a rate hike of 100 basis points, an assumption that penalized shares on the last two sessions.
Futures contracts on indices suggest an increase of 0.84% for the CAC 40 in Paris, 0.61% for the Dax in Frankfurt, 0.37% for the FTSE 100 in London and 0.8% for the EuroStoxx 50.
Fed Governor Christopher Waller and James Bullard, the chairman of the U.S. central bank’s St Louis regional branch, both said on Thursday they favor the hypothesis of a 75 basis point hike in the target fed funds rates at the next monetary policy meeting on 26 and 27 July.
These remarks, which have all the more weight since they come from two of the most “hawkish” members of the Fed’s Federal Open Market Committee (FOMC), weaken the hypothesis of a 100 basis point hike, considered increasingly credible by investors after the above-expected figures for consumer prices published on Wednesday and producer prices published on Thursday.
For Christopher Waller, “the markets may well have gotten a little carried away” on Wednesday.
The relief on the prospects for a rise in US rates should therefore outweigh the disappointment caused by the Chinese economic indicators of the day.
The world’s second largest economy contracted by 2.6% in the second quarter compared to the previous three months, a poor performance which is dragging down the Chinese stock markets but also the prices of base metals such as copper (-1 ,44%).
Investors will, however, be watching a new series of US indicators that include monthly retail sales figures, industrial production figures and the first estimate of the University of Michigan’s consumer confidence index. Wells Fargo and Citigroup banks must also present their quarterly results.
VALUES TO FOLLOW:
AT WALL STREET
The New York Stock Exchange ended Thursday well above its lows for the day, the Nasdaq even recording a slight increase at the close, investors having put into perspective over the hours the impact of the disappointing results of JPMorgan Chase and Morgan Stanley and risks related to producer price figures.
The Dow Jones index fell 0.46%, or 142.62 points, to 30,630.17, the Standard & Poor’s 500 lost 11.40 points, or 0.30%, to 3,790.38 and the Nasdaq Composite lost advanced 3.60 points (0.03%) to 11,251.19 points.
The S&P 500 had previously lost as much as 2.1% after results from JPMorgan Chase and Morgan Stanley, which reported lower earnings and highlighted the risk of an impending economic slowdown, and the rise stronger than expected ( +11.3% year on year) in producer prices in June.
JPMorgan shares ended down 3.5%, Morgan Stanley down 0.4%.
Index futures so far suggest an open up around 0.2%.
IN ASIA
On the Tokyo Stock Exchange, the Nikkei index ended up 0.54%, driven mainly by the rise in Fast Retailing (+8.70%) after raising its annual profit forecast and that of Nintendo (+ 3.16%) in response to the acquisition of an animation studio.
In China, the Shanghai SSE Composite lost 0.93% and the CSI 300 0.9% after the day’s economic figures.
CHANGES
The dollar pauses against other major currencies (+0.13%) in Asian trading after statements by Christopher Waller and James Bullard, but it remains just below the 20-year high set on Thursday and is still showing a increase of more than 1.5% over the week.
The euro, which fell in Thursday’s session to $0.995 in response to US producer price figures, took the opportunity to recover 0.06% against the greenback at 1.0022.
The Chinese yuan also hit its lowest level in two months after the poor GDP figures.
RATE
Yields on US Treasury bonds fell to 2.9411% for ten-year securities and 3.1075% for two-year ones.
If the two-ten-year segment of the yield curve remains inverted, the gap between the two maturities has narrowed to 17 basis points, against more than 27 points at the start of the day on Thursday, its highest level since September 2000 according to Refinitiv data.
In Europe, the ten-year German fell to 1.173% in early trading. Its Italian equivalent, at 3.374%, fell slightly after jumping nearly 15 basis points on Thursday in the face of fears of a new political crisis. The President of the Republic rejected in the evening the resignation submitted to him by the President of the Council, Mario Draghi, released by the 5 Star Movement (M5S).
OIL
The oil market is rising on the back of hopes for less sustained rate hikes in the United States, although questions about the strength of demand limit the upside potential.
Brent gained 0.54% to 99.64 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.29% to 96.06 dollars.
(Written by Marc Angrand, edited by Matthieu Protard and Kate Entringer)