by Claude Chendjou
PARIS (Reuters) – The main European stock markets are still expected to fall at the opening on Tuesday, new restrictive comments from central bankers continuing to fuel pressure on the bond market where American long rates rose to a new peak of 16 years while the dollar reached a nearly 10-month high.
According to the first available indications, the Parisian CAC 40 should lose 0.13% at the opening, the Dax in Frankfurt 0.04% and the FTSE 100 in London 0.05%. The EuroStoxx 50 index is expected to decline by 0.14%.
Market sentiment has been affected by monetary policy for several sessions, with the US Federal Reserve (Fed) and other central banks indicating that interest rates will remain high for longer than expected.
Christine Lagarde, the President of the European Central Bank (ECB), again agreed on this Monday, emphasizing the need to keep rates at a restrictive level, while Isabelle Schnabel, member of the ECB Governing Council , explained that the euro zone was not finished with inflation. Investors are now awaiting a speech from Philip Lane, chief economist of the Frankfurt institution, scheduled for the day.
In the United States, Chicago Fed President Austan Goolsbee said on Monday that inflation above the 2% target was a greater risk than a further slowdown in the economy.
The President of the Minneapolis Fed, Neel Kashkari, said he expected a further rise in interest rates before they remain at a high level for a long time.
Investors are also watching for gross domestic product (GDP) data from the United States and Britain, as well as retail sales data from Germany, among other statistics due this week, which are expected to influence on the trend before Friday’s publication of consumer prices in the euro zone and the PCE price index in the United States.
A WALL STREET
The New York Stock Exchange ended up on Monday, driven in particular by gains in Amazon and the energy sector, while bond yields continued to rise, in a context of search for details on the exact contours of the Fed policy.
The Dow Jones index gained 0.13%, or 43.04 points, to 34,006.88 points.
The broader S&P-500 gained 17.38 points, or 0.40%, to 4,337.44 points.
The Nasdaq Composite advanced 59.51 points (+0.45%) to 13,271.32 points.
A “tug of war” is between “investors apparently becoming increasingly concerned about ‘higher for longer’ (rates) and speculators saying maybe we’ve seen a correction and we can start building at higher levels,” said Chuck Carlson, managing director of Horizon Investment Services.
Among the main sectors of the S&P-500, energy was the best performer while on the securities side, Amazon gained 1.7%, the group having announced its intention to invest up to four billion dollars in the startup Anthropic in order to respond to growing competition in the field of artificial intelligence.
IN ASIA
On the Tokyo Stock Exchange, the Nikkei index fell 0.9% to 32,385.2 points and the broader Topix fell 0.42% to 2,375.6 points as the close approached.
The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) fell by 0.33%.
In China, the Shanghai SSE Composite lost 0.26% and the CSI 300 lost 0.4%.
VALUES TO FOLLOW IN EUROPE:
CHANGES
The dollar, which reached its highest level since November at 106.1 points on Monday, was almost stable on Tuesday (+0.07%) against a basket of reference currencies.
The euro, at a six-month low, is trading at $1.0584 (-0.06%). The European currency is heading towards a decline of 3% over the entire quarter, its biggest drop in a year.
The Chinese yuan varies little, trading at 7.3099 per dollar, despite the decision of the Chinese central bank to set the reference rate of its currency at a firmer level than that expected by the market.
The Japanese currency continues its slide, approaching 150 yen per dollar, due to differences in monetary policy between the Fed and the Bank of Japan (BoJ).
The yield on ten-year US Treasury bonds was stable on Tuesday, at 4.5458%, after having climbed the day before to 4.552%, a level not seen since October 2007. Over the month of September as a whole, it took more than 45 basis points.
OIL
The strength of the dollar and the prospect of high interest rates over a long period in most major economies are weighing on the oil market: Brent fell by 0.45% to 92.87 dollars per barrel and American light crude ( West Texas Intermediate, WTI) by 0.37% to $89.35.
NO MAJOR ECONOMIC INDICATOR ON THE AGENDA FOR SEPTEMBER 26
(Written by Claude Chendjou, edited by Bertrand Boucey)
©2023 Thomson Reuters, all rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. “Reuters” and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.