Winning return on equities, beginning of relief on rates


PARIS (Reuters) – European stock markets had their best session in more than three months on Friday, benefiting from the continued rebound on Wall Street thanks to a decline in market expectations on interest rates and a decline in base metal prices.

In Paris, the CAC 40 gained 3.23% (190.02 points) to 6073.35 points, its strongest increase in one session since March 16. In London, the FTSE 100 rose 2.72% and in Frankfurt, the Dax gained 1.59%.

The EuroStoxx 50 index ended up 2.82%, the FTSEurofirst 300 2.67% and the Stoxx 600 2.62%, its biggest one-day percentage gain in more than three months.

At the time of the close in Europe, Wall Street was also moving clearly in the green, with the Dow Jones, the Standard & Poor’s 500 and the Nasdaq Composite all three taking around 2.2%. US equities were thus on their way to their first positive weekly performance after three weeks of decline.

The Stoxx 600 posted a rebound of 2.4% over the week and the CAC 40 an increase of 3.24%, bringing its decline since the start of the year to 15.1%.

Friday’s progress was based in particular on the marked downward revision of investors’ expectations for rates in the United States: according to CME’s FedWatch barometer, the peak in US rates is now expected around 3.4 % next March, whereas it was above 4% by June 2023 a few days ago.

This decline is explained, among other things, by the marked fall in the prices of several raw materials, one of the drivers of inflation for several months: the price of copper posted its worst performance for the week for a year (a drop of about 7.5%), that of tin has fallen by 25% since Monday, unheard of, that of nickel by nearly 13%.

“The debate over the likely slowdown in the US economy, which could dampen the Fed’s tougher stance, coupled with falling commodity prices and bond yields, gives investors reason to justify a near-term rebound. “, comments Sam Stovall, director of investment strategy at CFRA Research in New York. “But I don’t think we’ve hit rock bottom yet.”

THE INDICATORS OF THE DAY

In the United States, new home sales posted an unexpected increase in May, but the final results of the University of Michigan’s monthly survey of American household sentiment confirm that this barometer has fallen to an all-time low even if inflation fears ease somewhat.

In Europe, the Ifo business climate index fell more than expected in June to 92.3 after 93 last month.

VALUES IN EUROPE

The rebound of the Nasdaq allows the European compartment of high technologies to post the strongest sectoral increase of the day with a gain of 3.74%.

Dutch payments specialist Adyen gained 6.32%, the best performance of the EuroStoxx 50, and in Paris, Dassault Systèmes took 4.32%.

At the top of the CAC 40, Sanofi won 5.04% after the announcement of the success of the first efficacy study of its candidate vaccine against the Omicron variant of the coronavirus.

In decline, the Italian oil services group Saipem fell by 21.38% after explaining that in the absence of a capital increase, its financial resources would not allow it to continue its activities for more than a year.

CHANGES

Changes in expectations for US rates and renewed appetite for risk penalized the dollar, which fell 0.35% against other major currencies.

The euro thus rises to 1.0554 dollars.

The greenback is expected to register its first weekly drop in a month.

RATE

Despite a slight rise on the day, benchmark yields in the euro zone posted their first weekly decline since mid-May, a consequence of renewed concerns over economic growth in recent days.

That of the German Bund at ten years ended the day at 1.432% but shows a fall of 22 basis points compared to last Friday. And the decline is even more marked for two- and five-year securities, which are even more sensitive to rate expectations.

The situation is comparable on the American market, the ten-year rises by four basis points to 3.1076% but is heading for a drop of more than 10 points over the week.

OIL

The oil market amplified its rise over the hours, the persistent tensions on the offer having regained the upper hand on the fears of a deterioration in demand.

Brent gained 3.11% to 113.47 dollars a barrel and American light crude (West Texas Intermediate, WTI) took 3.42% to 107.84 dollars.

Brent is thus back in positive territory for the week as a whole after the fall of more than 7% suffered last week, but the WTI still shows a weekly decline of 1.7%.

(Written by Marc Angrand, with Sruthi Shankar and Anisha Sircar in Bangalore)



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