by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to fall on Tuesday and the European stock markets, with the exception of London, evolve in the red at mid-session, the rebound of the previous day, born of reassuring news from China, starting to fade to give way to concerns about inflation and interest rates, two factors that have weighed on the markets since the start of the year.
Futures on New York indices signal an opening on Wall Street down 0.60% for the Dow Jones, 0.98% for the Standard & Poor’s 500 and 1.26% for the Nasdaq.
In Paris, the CAC 40 dropped 0.86% to 6,492.77 around 11:10 GMT. In Frankfurt, the Dax yields 1%. In London, the FTSE nibbles 0.04%.
The pan-European FTSEurofirst 300 index fell by 0.47%, the EuroStoxx 50 in the euro zone by 0.97% and the Stoxx 600 by 0.64%.
The renewed appetite for risk, which boosted growth stocks on Monday thanks in particular to the surge on the stock market of the Chinese ride-hailing giant Didi and a further easing of health restrictions in Beijing and Shanghai seems to have long fire, investors playing the card of caution before a series of major meetings this week.
Thursday will be held the meeting of the Governing Council of the European Central Bank (ECB) and Friday will be published consumer price statistics in the United States for the month of May.
A subject of concern in the markets, the fear of an acceleration in monetary tightening was confirmed on Tuesday. The Australian central bank surprised by raising its main interest rate by half a point, a stronger rise than expected, and it warned that the movement could continue in the coming months to curb inflation.
In the United States, the markets anticipate rate increases of half a point this month and in July and of nearly 200 points by the end of the year, while in the euro zone, an increase of 133 points is expected by the end of the year.
“There is currently quite a bit of uncertainty in terms of inflation and growth prospects and until investors have a bit more clear idea of the trajectory of the rise in interest rates, equities risk to suffer,” said Raffi Boyadjian, investment analyst at XM.
As for economic indicators, fears of a drop in activity were revived by factory orders in Germany, which recorded a surprise drop in April, the third drop since February, with a contraction of 2.7%. , in a context of uncertainties related to the Ukraine war.
In Britain, where Prime Minister Boris Johnson saved his post on Monday after a no-confidence motion by his party, businesses are suffering from rising prices as growth in private sector activity slowed in May, with a composite PMI index at 53.1, the lowest since February 2021. VALUES TO WATCH ON WALL STREET
Target fell 5.3% in pre-market trading and weighed on index futures on Wall Street after the US supermarket chain revised its operating margin forecast downward again.
Kohl’s jumped 15.3% in pre-market trading, the department store chain having entered into exclusive negotiations with the operator of Franchise Group shops for a possible takeover on the basis of a valuation of nearly eight billion of dollars (7.49 billion euros), announced the two companies on Monday evening.
VALUES IN EUROPE
In Europe, apart from energy (+0.09%), all the major compartments of the Stoxx 600 are in the red, the biggest drop being in new technologies which are penalized by both profit taking the day after their surge and the rise in bond yields.
Their Stoxx index lost 1.24%, while Worldline, STMicroelectronics, SAP, Capgemini and ASML dropped by 0.2% to 1.26%.
Dassault Systèmes lost 2.5%, penalized by the lowering of the recommendation of Jefferies, which expresses doubts about the ability of the software publisher to meet its objectives in dematerialized computing (“cloud”) without resorting to purchases.
SAS falls by 11.95%, the Swedish government having decided to no longer inject capital into the Scandinavian airline.
RATE
Bond yields, which hit record highs in early trading, eased by midday as some analysts believe rate hikes are already well priced in.
The ten-year German Bund rate, which briefly touched an eight-year high at 1.343% at the start of the session, fell three basis points to 1.298%. The two-year one rose to an 11-year high and the five-year one to a nine-year high, at 0.697% and 1.079% respectively.
In the United States, the yield on ten-year US Treasury bonds remains above 3%, a level crossed on Monday for the first time in almost a month.
CHANGES
The dollar index, which measures the movements of the greenback against a basket of major currencies, is moving to a two-week high, supported by the rise in bond yields. It gained 0.21% and against the yen, it registered a new high of 20 years, the Japanese currency having fallen to 133 for the dollar the day after the governor of the Japanese central bank Haruhiko Kuroda, on the commitment unshakable of the institution in favor of a “powerful” monetary stimulus.
The euro, down 0.14%, suffered less than the yen and is trading at 1.0677.
The pound fell to an almost three-week low against the dollar at 1.2433 after Conservative MPs voted closely on confidence in the British prime minister.
OIL
Oil prices, broadly stable at mid-session, move on the back of supply tensions, the prospect of rising demand as health restrictions ease in China and renewed risk appetite .
The barrel of Brent fell 0.14% to 119.35 dollars and that of American light crude (West Texas Intermediate, WTI) 0.05% to 118.44 dollars.
(Written by Claude Chendjou, edited by Kate Entringer)