Wall Street expected to rise cautiously, Europe declines after PMIs

PARIS (Reuters) – Wall Street is expected to rise cautiously at the opening on Monday, while European stock markets decline mid-session after the publication of slowing PMI indicators which raise fears of a recession.

Futures on New York indices suggest Wall Street opening in the green, with the Dow Jones nibbling 0.11%, while the Standard & Poor’s 500 takes 0.21% and the Nasdaq 0.23%.

In Paris, the CAC 40 declined by 0.36% to 7,022.21 points around 11:45 GMT, compared to a drop of 0.10% for the FTSE in London, and 0.19% for the Dax in Frankfurt.

The pan-European FTSEurofirst 300 index lost 0.14%, compared to 0.21% for the EuroStoxx 50 and 0.10% for the Stoxx 600.

The PMI indicators published on Monday revived fears of the European economy falling into recession.

The economy of the 20 countries sharing the euro contracted by 0.1% in the third quarter, according to official data, while the final composite PMI index for the month of October shows a further deterioration at the start of the fourth trimester.

The region’s GDP could therefore decline again in the fourth quarter, which weighs on risky assets.

These fears take precedence over the more accommodating message from central banks: the European Central Bank paused in its rate increases during its last meeting, as did the Federal Reserve in the United States, which gives hope to the markets an upcoming easing of monetary policies.

“The level of valuation of the equity markets, reached after the recent decline, could allow a rebound now that the message from central banks seems to indicate that the high point has been reached on rates,” explains Gilles Guibout, head of European equities at Axa IM.

“However, the potential for this rebound could be limited, both by the first publications leaning in favor of an overall deterioration in the quality of results and by the lack of visibility on the extent of the economic slowdown.”

VALUES TO FOLLOW IN WALL STREET

Tesla plans to build a 25,000 euro car in its factory near Berlin, and also plans to increase wages by 4% for German workers, under pressure from unions.

VALUES TO FOLLOW IN EUROPE

Airline stocks are rising after Ryanair said it expects a record annual profit this year, easing investors’ concerns about a possible fall in fares over the winter. The British group increased by 6.35% while Air France-KLM gained 2.55%, Easyjet 4.29% and IAG 1.43%.

Telecom Italia drops 2.35% after the announcement on Sunday of the approval by the board of directors of the telecom operator of the sale of its fixed network to the private equity fund KKR, a decision contested by its main shareholder Vivendi which declines by 1.75%.

Italy’s largest bank, Intesa Sanpaolo, rose 1.13% after raising its profit target for 2023 and pledging to increase shareholder remuneration.

RATE

European yields are recovering after slumping last week as investors bet on a sharp ECB rate cut in 2024, pushing the yield on the German 10-year sovereign to a seven-week low.

The yield on the ten-year Treasury rose 3.5 bp to 4.5932%, while the two-year rose 3.8 bp to 4.8697%.

The yield on the German ten-year rate rose by 6.2 bp to 2.699%, that of the two-year rate by 3.8 bp to 3.071%.

CHANGES

The Fed’s latest decision continues to weigh on the dollar, which is eroding to misfortune.

The dollar fell 0.11% against a basket of reference currencies, the euro gained 0.22% to 1.0753 dollars and the pound sterling gained 0.41% to 1.2425 dollars.

OIL

Crude is clearly rising, with Saudi Arabia and Russia having recommitted to maintaining their production cuts until the end of the year.

Brent rose 1.57% to $86.22 per barrel, American light crude (West Texas Intermediate, WTI) rose 1.69% to $81.87.

(Written by Corentin Chappron, edited by Kate Entringer)