EUROPEAN STOCK EXCHANGES EXPECTED TO FALL
PARIS (Reuters) – The main European stock markets are expected to fall on Friday and should thus start the third quarter of the year as they finished the second, in the red, failing to overcome the uncertainties linked to the rise in interest rates and at risk of recession.
Index futures suggest a decline of 0.85% for the Dax in Frankfurt, 0.51% for the FTSE 100 in London and 0.9% for the EuroStoxx 50. As for the CAC 40 in Paris, it could yield around 0.6% according to the first indications available.
The Paris market lost 11.07% in the second quarter and 17.2% since January 1 while the broad European Stoxx 600 index fell 10.67% over April-June and 16.5% over the six first months of the year.
As for the MSCI world index, it lost 16.1% in the second quarter, its worst quarterly performance since the start of 2020. It had not chained two quarters of decline since 2009.
Thursday’s session was marked by, among other things, lower-than-expected figures for US household consumption spending in May, fueling fears of a recession in the United States.
And the day that is beginning will give investors multiple opportunities to test the reliability of their economic assumptions: in Europe, the morning will be punctuated by the final figures of the PMI manufacturing indices before the first estimate of inflation in the euro zone in June and in the United States, the ISM manufacturing index will be published half an hour after the opening of Wall Street.
“A lot of investors want clarity on the outlook,” said Steven Wieting, director of investment strategy at Citi Global Wealth Investments. The year 2020, he explains, “was a clear time: the economy was depressed but you could put your money to work with great confidence. You can’t say the same today.”
In China, the PMI Caixin index for the industrial sector rose in June to its highest level for 13 months, at 51.7.
AT WALL STREET
The New York Stock Exchange ended down Thursday the last session of its worst semester in more than 50 years, marked successively by the continuation of the pandemic, the war in Ukraine; inflation and the start of the rise in interest rates.
The Dow Jones index fell 0.82% on the day, or 253.88 points, to 30,775.43, the Standard & Poor’s 500 lost 33.45 points, or 0.88%, to 3,785.38 and the Nasdaq Composite fell 149.16 points (-1.33%) to 11,028.74.
In decline throughout June and the second quarter, the S&P 500 has fallen 20.58% since January 1, its largest percentage drop for a first half since 1970.
The Nasdaq posted the largest percentage decline in its history for the January-June period (-29.51%) and the Dow its largest percentage decline in the first half since 1962 (-15.31%).
Index futures so far suggest a pullback of around 1% ahead of the Independence Day long weekend.
On the Tokyo Stock Exchange, the Nikkei index lost 1.74% less than an hour from closing and fell back below 26,000 points for the first time in ten days.
Added to concerns for the US economy are the fall of Mitsubishi and Mitsui, which lost 6.02% and 6.19% respectively after Russia’s announcement of a takeover of the oil and gas consortium Sakhalin Energy Investment Company, of which they both hold almost a third of the shares.
In China, the Shanghai SSE Composite lost 0.26% and the CSI 300 0.46%.
The dollar, which suffered on Thursday from weaker-than-expected US indicators, appreciated against the other major currencies (+0.20%) and is heading for an increase of more than 0.7% over the entire week.
The euro, on the other hand, fell back close to $1.0450 (-0.25%) and has lost almost 1% since the start of the week, a drop that reflects the additional risk associated with the euro zone in because of its dependence on Russian hydrocarbons.
The yield on ten-year U.S. Treasuries is flat in Asian trading at 2.9593% after falling for the third day in a row on Thursday in reaction to U.S. household consumption figures.
The two-year-old meanwhile returned below 3% on Thursday for the first time this week.
The oil market, which was rising in early trade after falling 3% on Thursday, is failing to hold on to its gains as traders play it safe ahead of the US National Day long weekend.
Brent fell 0.12% to $108.90 a barrel and US light crude (West Texas Intermediate, WTI) 0.26% to $105.49.
Both are expected to register their third weekly decline in a row.
(Written by Marc Angrand, with Tom Westbrook in Singapore)