Europe ends in the red before Fed “minutes” – 08/17/2022 at 18:08

Europe ends in the red before Fed "minutes" - 08/17/2022 at 18:08
EUROPEAN STOCK MARKETS ENDED LOWER ON WEDNESDAY

EUROPEAN STOCK MARKETS ENDED LOWER ON WEDNESDAY

by Claude Chendjou

PARIS (Reuters) – European stock markets ended lower on Wednesday and Wall Street was also trading in the red mid-session, as equities were caught up in fears over inflation and changing economic conditions, while yields Bonds are rising again before the publication of the minutes of the last meeting of the American Federal Reserve (Fed).

In Paris, the CAC 40 ended down 0.97% at 6,528.32 points. The British Footsie lost 0.28% and the German Dax 2.04%.

The EuroStoxx 50 index fell by 1.29%, the FTSEurofirst 300 by 0.85% and the Stoxx 600 by 0.95%.

After five consecutive sessions of rise in the Stoxx 600, risk aversion dominated the session in Europe while the growth of the gross domestic product (GDP) of the euro zone in the second quarter was slightly less sustained than initially announced (+ 0.6% instead of +0.7%), according to Eurostat’s second estimate.

Consumer price inflation in the UK also reached 10.1% year on year in July, its highest level since February 1982.

In the United States, retail sales showed an unexpected stagnation in July while economists polled by Reuters had forecast an average increase of 0.1%, official statistics showed on Wednesday.

Investors are now waiting at 6:00 p.m. GMT for the “minutes” of the Fed’s July meeting which could help to better assess the risk of a recession and the extent of the expected rate hike by the US central bank in September.

VALUES IN EUROPE

In Europe, most sectors ended in the red and the few gains were made by defensive compartments such as beverages and food (+0.47%).

On the CAC 40, Sanofi, one of the heavyweights of the Parisian index, fell 5.68% after the announcement of the cessation of the amnecestrant development program for the treatment of breast cancer.

In Frankfurt, Uniper dropped 12.13%, the German group having published a half-yearly net loss of 12 billion euros, largely linked to the drop in Russian gas supplies.

On the rise, Swiss life insurance giant Swiss Life gained 0.27% after a 4% rise in half-year net profit, while Danish brewer Carlsberg advanced 3.85% as the group said that inflation had so far had no noticeable impact on the behavior of its customers.

AT WALL STREET

At the time of the close in Europe, the Dow Jones fell by 0.91%, the Standard & Poor’s 500 by 1.14% and the Nasdaq by 1.73%, the indices being affected in particular by the results of the distribution sector (-1.74%) which revive fears about inflation and its effect on consumption.

The American supermarket group Target, which reported a quarterly profit down 90% and like-for-like sales below expectations, lost 3.54%.

Lowe’s, the number two US DIY store, also announced a surprise drop in quarterly like-for-like sales. However, the title advances by 0.61%, supported by an annual earnings per share forecast at the top of the range indicated above.

The technology compartment (-1.34%), comprising growth stocks such as Amazon (-2.58%) and Tesla (-1.42%), is for its part affected by the rise in bond yields.

RATE

In Europe, bond yields were supported by the prospect of a further 50 basis point hike in September in European Central Bank (ECB) rates after record UK inflation figures.

The ten-year German Bund yield rose more than ten basis points to 1.08%, its highest since July 22, and the two-year yield, which is even more sensitive to changes in key rates, jumped by nearly 15 points to 0.72%, a peak since July 21.

Two-year and 10-year U.S. Treasuries are up 8.6 points to 3.337% and 7.6 points to 2.898%, respectively, as traders equally price the likelihood of a 50-point Fed rate hike. basis or 75 points.

CHANGES

The dollar gains 0.27% against other major currencies before the Fed’s “minutes”, after having already gained 2% since last week.

The euro, down 0.04%, is trading at 1.0162 dollars.

The New Zealand dollar gained as much as 0.6% after the country’s central bank raised its key rate by 50 basis points to 3.00%, while hinting that other increases could follow.

The British pound is also appreciating after the UK inflation figures.

OIL

Oil prices are recovering slightly after falling to six-month lows on Tuesday, as the American Petroleum Institute’s (API) announcement of lower crude oil and fuel inventories last week in the United States offered them a little support.

Brent rose 0.22% to 92.54 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.38% to 86.86 dollars a barrel.

(Some data may show a slight shift)

(Written by Claude Chendjou, edited by Jean-Michel Bélot)

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