RISK AVERSION DOMINATES, GAS FEARS ARE AMPLIFYING
by Laetitia Volga
PARIS (Reuters) – Wall Street is expected to open lower on Tuesday while European stocks, except for London, are in the red at mid-session on fears over Russian gas and a mixed reception reserved for several corporate results. on the eve of a new monetary tightening by the Federal Reserve.
Futures contracts signal a decline of -0.38% for the Dow Jones, -0.36% for the Standard & Poor’s-500 and -0.45% for the Nasdaq.
In Paris, the CAC 40 fell -0.27% to 6,220.84 around 11:50 GMT. In Frankfurt, the Dax lost -0.66% and in London, the FTSE gained 0.53%.
The pan-European FTSEurofirst 300 index gained 0.23%, the eurozone’s EuroStoxx 50 fell -0.41% and the Stoxx 600 rose 0.12%.
Caution has dominated the markets since the beginning of the week, pending monetary policy decisions from the Federal Reserve, which is expected to raise its rates against inflation again on Wednesday.
The renewed uncertainties concerning Russian gas flows to Europe, which have led the EU-27 to agree to reduce their consumption next winter, are also encouraging investors to abandon risky assets.
“The idea that the price to pay for supporting Ukraine against Russia will be gas rationing is increasingly widespread,” said Lyn Graham-Taylor, senior strategist at Rabobank. “All of this fuels concerns about recession and inflation.”
The publications of the results and forecasts of the major listed companies continue in the meantime. Those of Alphabet and Microsoft will open the ball for the giants of the technology sector after the close of Wall Street. WALL STREET VALUES TO FOLLOW
In pre-market trading, Walmart caught the eye with a -9.8% drop, the number one retailer in the United States having lowered its annual and quarterly profit forecasts due to inflation on the buying behavior of its customers.
Investors are also aware of the results of General Motors, McDonald’s or Coca-Cola.
3M reported lower adjusted earnings due to the zero COVID strategy in China and announced the spin-off of its healthcare business.
VALUES IN EUROPE
The Stoxx distribution index (-2.57%) posted the strongest sectoral decline after the downward revision of profit forecasts for the American Walmart.
H&M, Marks & Spencer and Zalando lost between -3.26% and -5.69%.
At the CAC 40, Veolia lost -4.49% after advice from JPMorgan to “underweight” while Rémy Cointreau fell -2.29% after its results.
Dassault Systèmes takes 0.75% after raising its diluted net earnings per share target for 2022.
UBS fell -7.15% after posting lower-than-expected net profit in the second quarter, as its investment banking and wealth management businesses suffered from difficult market conditions.
The rise in the basic resources (0.6%) and energy (+1.36%) compartments benefited the FTSE 100, as did the rise in Unilever (+2.41%) and Compass ( +2.1%).
RATE
The yield of the Bund and that of the ten-year OAT evolve in two months at most, the announcement by Gazprom of an upcoming drop in its gas deliveries to Europe fueling fears of a sharp economic slowdown and of an energy crisis.
Deutsche Bank says Germany could get through the winter if Nord Stream 1 gas pipeline capacity is cut to 40%, but at just 20% heavy rationing is likely to be needed.
The ten-year German rate lost more than eight basis points to 0.923% and its French equivalent lost more than nine points to 1.515.
In their wake, the yield on 10-year US Treasury bills stands at 2.7485%, down more than six basis points.
CHANGES
Fears around Russian gas also weigh on the euro, down -0.86% to 1.0132 dollars.
The dollar gained 0.68% against a benchmark basket.
OIL
Oil prices are up for the second consecutive session due to supply concerns in Europe.
Brent gained 1.61% to 106.84 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.83% to 98.47 dollars.
(Written by Laetitia Volga, edited by)