Drop in sight in Europe between monetary tensions and Chinese slowdown – 09/07/2022 at 08:33

Drop in sight in Europe between monetary tensions and Chinese slowdown - 09/07/2022 at 08:33
MAJOR EUROPEAN STOCK EXCHANGES EXPECTED TO DROP SIGNIFICANTLY

MAJOR EUROPEAN STOCK EXCHANGES EXPECTED TO DROP SIGNIFICANTLY

PARIS (Reuters) – The main European stock markets are expected to fall sharply on Wednesday after the decline on Wall Street and the figures below expectations for Chinese foreign trade.

Index futures suggest a decline of 1.19% for the CAC 40 in Paris, 0.8% for the Dax in Frankfurt, 0.92% for the FTSE 100 in London and 0.89% for the EuroStoxx 50.

The ISM services sector activity index in the United States came out higher than expected on Tuesday at 56.9 for August, a figure interpreted as one more argument in favor of a sharp rate hike in the future. of the next meeting of the Federal Reserve, in two weeks.

Markets estimate a 75% chance of another three-quarter point hike in the fed funds rate target on September 21, bringing it to 3%-3.25%, according to the FedWatch barometer .

“Good news for the real economy has become bad news for the market, whether it’s the bond market or the equity market,” said Redmond Wong, strategist at Saxo Capital Markets in Hong Kong.

The prospect of an accelerated tightening of US monetary policy is fueling investors’ nervousness all the more as, outside the United States, signs of deterioration in the economic situation continue to accumulate.

In China, export growth slowed to 7.1% year on year last month from 18% in July.

In Germany, industrial production fell by 0.3% in July, a drop a little less marked than expected.

Added to these elements, in Europe, is the concern aroused by the energy crisis, two days before a Council of European Energy Ministers called to examine new measures to reduce gas and electricity consumption. .

The upcoming session will be animated among other things by the decisions of the Bank of Canada, which should announce at 14:00 GMT a rate hike of 75 basis points according to the Reuters consensus, some observers not excluding an even stronger measure after the increase of 100 points decided in July.

AT WALL STREET

The New York Stock Exchange ended a volatile session lower on Tuesday after the ISM services index, which fueled the rise in bond yields.

The Dow Jones index fell 0.55%, or 173.14 points, to 31,145.30, the Standard & Poor’s 500 lost 16.07 points, or -0.41%, to 3,908.19 and the Nasdaq Composite fell 85.96 points (-0.74%) to 11,544.91.

The Nasdaq now shows seven consecutive sessions of decline, which had not happened since November 2016.

The CBOE volatility index meanwhile hit its highest level in nearly two months during the session.

Futures on major indices suggest further decline.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended down 0.71%, as fears of a deterioration in the economic situation took precedence over the beneficial effect of the depreciation of the yen for export-oriented stocks. .

The flagship index of the Japanese market hit its lowest level in session since July 19.

In China, the rise in semiconductor values ​​limits the decline by obscuring the disappointment of foreign trade, after the announcement by Beijing of a strengthening of the sector: the SSE Composite of Shanghai gives up 0.08% and the CSI 300 0 .06%.

CHANGES

Rising for the third session in a row, the dollar at the start of the day recorded a new high of 20 years against a basket of reference currencies (+0.31%) and 24 years against the yen, at 144 ,38.

The euro meanwhile fell back below 0.99 dollars (-0.09%), very close to the 20-year low recorded on Tuesday at 0.9864.

RATE

Continuing its momentum on Tuesday, the yield on ten-year Treasury bills in Asia reached its highest level since June 16 at 3.365%.

The two-year, even more sensitive to expectations of a rise in key rates, remains above 3.5% after reaching 3.551% in session on Tuesday, the highest since November 2007.

In Europe, the ten-year German Bund yield, a benchmark for the euro zone, took just over three basis points in early trading to 1.639%, the highest since June 29.

OIL

Expectations of rate hikes and health restrictions in China, two factors likely to dampen demand, are dragging the oil market down after the rise linked to OPEC+’s decision to cut production a little in October.

Brent fell 1.35% to 91.58 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.66% to 85.44 dollars.

(Some data may show a slight shift)

(Written by Marc Angrandn with Selena Li in Hong Kong)

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