by Claude Chendjou
PARIS (Reuters) – The main European stock markets are expected to be on a cautious note on Monday after the rally observed last week in a context of easing on the bond market resulting from announcements from the American Federal Reserve (Fed) and economic indicators suggesting the end of the rise in interest rates.
According to the first available indications, the Parisian CAC 40 should lose 0.15% at the opening. The Dax in Frankfurt could lose 0.03%, while the FTSE 100 in London could gain 0.07%. The EuroStoxx 50 index is expected to fall by 0.07%.
After the status quo on rates decided respectively by the Fed, the European Central Bank (ECB) and the Bank of England (BoE), several economic data, including the employment report and the ISM index of government services -United States, confirmed the slowdown of the economy, reinforcing the scenario of an impact of the tightening of the major central banks and the prospect of a lasting pause on the cost of credit.
The markets now estimate with a 90% probability that the Fed will no longer raise its rates in the current tightening cycle and that it could even lower them as early as June, according to the FedWatch barometer.
This hope will be tested by new data, including the final monthly figures for services activity in several euro zone countries expected during the day, while this indicator in the United Kingdom showed a further contraction on Friday in october.
For the rest of the week, inflation indicators are expected (Tuesday) and monthly statistics on retail sales in the euro zone (Wednesday), British gross domestic product (Friday) and interventions from central bankers.
A WALL STREET
The New York Stock Exchange ended up on Friday against a backdrop of a sharp drop in rates, the ten-year yield having reached a low of more than five weeks during the session, after the report on the labor market in the United States which state of 150,000 non-agricultural jobs created in October instead of 180,000.
The Dow Jones index gained 0.66%, or 222.24 points, to 34,061.32 points.
The broader S&P-500 gained 40.56 points, or 0.94%, to 4,358.34 points.
The Nasdaq Composite advanced 184.09 points (+1.38%) to 13,478.28 points.
“(The jobs report) reinforces the sentiment that the Fed will maintain the status quo for the foreseeable future and will only raise rates again if inflation accelerates,” commented Matt Palazzolo, strategist at Bernstein Private Wealth Management.
Most of the eleven major sectors of the S&P500 rose, notably real estate, while on the value side, Apple finished lower after reporting lower-than-expected sales forecasts for the holiday period.
IN ASIA
On the Tokyo Stock Exchange, the Nikkei index ended with a gain of 2.37% at 32,708.48 points, at a high of more than a month, and the broader Topix gained 1.64% at 2,360.46 points. The indices were supported by the semiconductor sector and by the good performance of Wall Street on Friday.
Regarding monetary policy, the Bank of Japan (BoJ) is on the verge of ending its accommodative bias, its governor Kazuo Ueda having declared on Monday that the institution was now close to achieving its inflation target.
Minutes from the BoJ’s September 21-22 meeting, however, show that most members of the central bank’s board of governors did not consider further adjustments to yield curve control necessary and agreed to continue monetary easing to achieve inflation and wage growth targets.
The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) gained 2.0%, after gaining 2.8% last week.
In China, the Shanghai SSE Composite gained 0.90% and the CSI 300 increased by 1.34%.
VALUES TO FOLLOW IN EUROPE:
Ryanair announced on Monday that it anticipates a record annual profit and committed for the first time to paying shareholders a regular dividend.
EXCHANGES/RATES
The dollar is practically stable (-0.04%) against a basket of reference currencies after falling by 1.3% last week, to its lowest level since the end of September.
The euro nibbles another 0.06%, to 1.0735 dollars after a gain of 1% on Friday, its highest level in two months.
The pound sterling stands at 1.2384 dollars (+0.08%).
On the bond market, the yield on ten-year US Treasury bonds, which has lost 35 basis points since its 16-year peak reached in October, is slightly up again, by around three points, to 4.5912%. . This rate reached 5.021% last month.
The yield on the German Bund of the same maturity, which fell by 18 points last week, its largest weekly fall since June 2, increased by 4.6 basis points, to 2.682%.
OIL
Oil prices are increasing, with Saudi Arabia and Russia, two of the main crude exporters, having reaffirmed on Sunday their intention to continue reducing their extractions until the end of the year: Brent advances by 0.61% to 85.41 dollars per barrel and American light crude (West Texas Intermediate, WTI) by 0.73% to 81.10 dollars.
(Written by Claude Chendjou, edited by Blandine Hénault)
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