Stock market: Risk aversion dominates after the downgrading of the US rating by Fitch

by Claude Chendjou

PARIS (Reuters) – European stock markets fell mid-session on Wednesday and Wall Street is also expected to fall, investors moving away from risky assets after the agency Fitch’s decision to downgrade the sovereign rating of the United States.

Futures on New York indices signal an opening on Wall Street down 0.31% for the Dow Jones, 0.46% for the Standard & Poor’s 500 and 0.69% for the Nasdaq.

In Paris, the CAC 40 dropped 0.51% to 7,368.18 points around 11:30 GMT. In Frankfurt, the Dax fell 0.73% and in London, the FTSE fell 0.96%.

The pan-European FTSEurofirst 300 index lost 0.81%, the Eurozone EuroStoxx 50 0.71% and the Stoxx 600 0.80%.

Fitch downgraded the U.S. credit rating to ‘AA+’ on Tuesday over the country’s fiscal governance and public debt burden, a surprise move that translates into a consecutive drop in yields in the bond market to the run on safe-haven assets.

The yield on ten-year US Treasuries fell more than three basis points to 4.0151% after falling as low as 4.009%. That of the German Bund of the same maturity appears at 2.474%, down more than five basis points.

Some market observers, however, relativize the scope of Fitch’s decision, believing that it would take a further downgrade of the United States’ rating by another major rating agency for the impact to be lasting.

“Whether the stock decline is related to this is purely a matter of sentiment and not a rational decision,” said Caroline Simmons, UK chief investment officer at UBS Global Wealth Management.

According to her, in view of the current fairly high valuations, investors are above all extremely sensitive to any news deemed negative. In addition, the PMI figures for services in Europe and the United States and especially the monthly report on American employment are expected this week, while the ADP survey, scheduled for 12:15 GMT, will give a first overview of the market. work.

WALL STREET VALUES TO FOLLOW

Advanced Micro Devices (AMD) was up around 3% in off-hours trading, as the group announced on Tuesday that it plans to launch specialized artificial intelligence chips this year that could compete with Nvidia’s products.

Starbucks fell 2% in pre-market after publishing Tuesday quarterly like-for-like sales below expectations in a context of falling demand.

VALUES IN EUROPE

All major Stoxx 600 sub-funds are in the red, with Retail (-1.36%) and Basic Resources (-1.55%) posting the two biggest sector declines amid concerns about an economic slowdown .

In corporate news, Hugo Boss, which raised annual forecasts, is down 1.12%, victim of profit-taking according to analysts, the share having risen nearly 34% since the start of the year. .

Siemens Healthineers fell 5.8% after an unexpected drop in quarterly operating profit.

CHANGES

In exchange, the dollar is virtually stable (-0.07%) against a basket of benchmark currencies after rising by up to 0.23% following Fitch’s decision.

The euro is displayed at 1.0974 dollars (-0.07%) and the pound sterling at 1.2776 dollars (-0.01%).

The Japanese currency is trading at 142.73 yen to the dollar (+0.41%) as traders continue to assess the impact of the Bank of Japan’s (BoJ) decision to loosen its control of the yield curve. rate.

OIL

Oil prices are trading near their highest levels since April, supported by data showing a drop in crude inventories in the United States last week, a sign of strong demand.

Brent rose 0.80% to 85.59 dollars a barrel, close to its highest since April, US light crude (West Texas Intermediate, WTI) 0.91% to 82.11 dollars.

(Written by Claude Chendjou, edited by Kate Entringer)