by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to fall on Monday and European stocks are trading in the red mid-session, with equity markets showing some caution as new inflation data from the United States and Europe will be published on Wednesday and that the week will be marked by the start of the earnings season for big companies.
Futures on New York indices signal an opening on Wall Street down 0.38% for the Dow Jones, 0.53% for the Standard & Poor’s 500 and 0.72% for the Nasdaq.
In Paris, the CAC 40 fell by 0.61% to 5,996.36 points around 11:45 GMT. In Frankfurt, the Dax fell by 0.75% and in London, the FTSE fell by 0.54%.
The pan-European FTSEurofirst 300 index fell 0.42%, the Eurozone EuroStoxx 50 0.54% and the Stoxx 600 0.41%.
Market trends are affected by the health situation in China, with several Chinese cities announcing new travel restrictions and even lockdowns in an attempt to contain the COVID-19 outbreak as Shanghai prepares for a new campaign of massive screening.
In economic indicators, the monthly employment report in the United States showed a robust labor market on Friday, which could give the United States Federal Reserve (Fed) an additional argument to accelerate its monetary tightening.
Consumer price data for June in the United States will be released on Wednesday, while in Europe, final inflation data for France and Germany are due the same day.
In terms of corporate earnings releases, banks JPMorgan Chase and Morgan Stanley will kick off the second quarter on Thursday as the consensus expects Standard & Poor’s 500 earnings to rise 6% year on year.
WALL STREET VALUES TO FOLLOW
VALUES IN EUROPE On the pan-European Stoxx 600, the new health restrictions in China mainly affect the commodity compartment (-1.72%), the automotive sector (-1.26%) and luxury stocks.
LVMH fell by 1.21%, Kering by 1.82% and Richemont by 1.12%.
The Anglo American, Glencore and Rio Tinto mining groups respectively yielded 4.08%, 1.32% and 1.10% in London, while in Paris, Eramet fell by 2.53% and ArcelorMittal by 1.28%.
The defensive sector of utilities (+0.28%) is one of the few to resist the downward trend, thanks among others to EDF (+0.77%), which benefits from the increase in the recommendation of JPMorgan to “overweight”, the intermediary expecting a premium as part of the group’s renationalisation project.
Elsewhere in Europe, Danske Bank lost 3.73% after the bank lowered its full-year net profit forecast.
CHANGES
On the foreign exchange market, the euro, which came close to parity with the dollar on Friday at 1.0072 after the publication of the monthly US employment report, fell 0.69% to 1.0113.
The single European currency is affected, among other things, by maintenance work on Nord Stream 1, the most important Russian gas pipeline serving Germany, which is shut down for ten days, while the context of the war in Ukraine raises fears a prolonged suspension of Russian hydrocarbon supplies. The dollar (+0.65%), for its part, benefits from its status as a safe haven asset against other major currencies.
Against the yen, the greenback touched a new high of 24 years, the coalition in power in Japan, favorable to a very accommodating monetary policy, having confirmed its majority in the Senate on Sunday in elections marked by the assassination two days rather former Prime Minister Shinzo Abe.
RATE
Bond yields in Europe are falling as a key gauge of long-term inflation expectations in the eurozone fell back below 2% on Monday for the first time since March, as concern over slowing economic activity left also foresee an appeasement on the price front.
The ten-year German Bund yield fell by more than four basis points to 1.297% and its French equivalent fell by more than five points to 1.819%.
In the United States, the yield on ten-year Treasuries fell three points to 3.071% after Friday’s sharp rise linked to the employment report, which confirmed the scenario of a 75-point hike in Fed rates this this month.
OIL
Oil prices are falling again, penalized by fears of a recession and new health restrictions in China.
The barrel of Brent dropped 1.86% to 105.03 dollars and that of American light crude (West Texas Intermediate, WTI) 2.33% to 102.35 dollars.
NO MAJOR ECONOMIC INDICATOR ON THE JULY 11 AGENDA
(Written by Claude Chendjou, edited by Marc Angrand)