Former Paris Stock Exchange
by Claude Chendjou
PARIS (Reuters) – The main European stock markets are expected to rise on Friday the day after announcements from the European Central Bank (ECB) which suggest the end of the rise in its interest rates, but the session could be volatile due to the day of the “four witches” which marks the expiration of futures contracts.
According to the first available indications, the Parisian CAC 40 should gain 0.66% at the opening, the Dax in Frankfurt 0.69% and the FTSE 100 in London 0.55%. The EuroStoxx 50 index is expected to increase by 0.77%.
The ECB raised its key rates on Thursday for the tenth time in a row in the face of persistent inflationary pressures, bringing the deposit rate to 4%, but signaled that this cycle of monetary tightening, the most aggressive since the creation of the institution, was probably coming to an end.
“The signal that the ECB does not plan to raise rates further is quite clear,” stressed Holger Schmieding, economist at Berenberg.
Citigroup, for its part, now expects an ECB rate cut in June 2024 instead of September 2024.
On the financial markets, this resulted in a weakening of the euro and bond yields in the region, a movement likely to continue this Friday, especially as the American Federal Reserve (Fed) should opt next week for a break in its rates before also a final increase in the cost of credit in November, investors want to believe.
The session could, however, be indecisive due to the day of the “four witches”, third Friday of September, which corresponds to the expiration of four types of derivative products and is usually marked by a certain volatility.
Investors are also awaiting monthly economic indicators in the United States, notably the “Empire State” manufacturing index and the Michigan confidence index.
A WALL STREET
The New York Stock Exchange ended higher on Thursday, the publication of stronger than expected economic data having allayed fears of a recession, without fueling those of a rate hike by the Fed.
The Dow Jones index gained 0.96%, or 331.58 points, to 34,907.11 points.
The broader S&P-500 gained 37.66 points, or 0.84%, to 4,505.10 points.
The Nasdaq Composite advanced 112.47 points (0.81%) to 13,926.05 points.
Retail sales in the United States notably increased more than expected in August, increasing by 0.6%.
“The economic data released today confirms that we are heading towards a soft landing, without the Fed thinking that it will have to make a few additional rate hikes,” said Ross Mayfield, analyst at Baird. “Overall, it’s pretty optimistic.”
The session was marked by the stock market debut of Arm, the largest IPO in the United States since 2021, with a share trading at a price of $56.1, above the $51 set by the chip designer.
IN ASIA
On the Tokyo Stock Exchange, the Nikkei index ended with a gain of 1.1% to 33,533.09 points, having touched a two-month high, while the broader Topix gained 0.95 % at 2,428.38 points.
The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) increased by 0.79%.
In China, the Shanghai SSE Composite lost 0.46% and the CSI 300 0.76%, in a volatile session where the indices moved up and down.
Industrial production and retail sales in China came out on Friday above expectations for the month of August, up 4.5% and 4.6% respectively on an annual basis, suggesting that the measures deployed by Beijing to support its economy are starting to bear fruit.
EXCHANGES/RATES
The dollar fell (-0.20%) against a basket of reference currencies after hitting its highest since early March on Thursday, at 105.43 points. However, the greenback is heading towards a ninth weekly gain, its longest streak in this direction in nine years.
The euro rebounded slightly, by 0.21% to 1.0663 dollars, but remains at a low since March 20.
The yield on ten-year US Treasury bonds is stable at 4.2825%, as is that of the German Bund of the same maturity which is at 2.608%.
OIL
The oil market is heading for a third straight weekly rise as better-than-expected Chinese economic data and reports of record crude consumption bolster the outlook for sustained demand.
Brent rose 0.70% to $94.36 per barrel and American light crude (West Texas Intermediate, WTI) rose 0.79% to $90.87.
The two oil benchmarks gained around 4% over a week.
(Written by Claude Chendjou, edited by Jean-Stéphane Brosse)