Rise in sight in Europe, the dollar and yields retreat (updated) – 08/30/2022 at 08:35

Rise in sight in Europe, the dollar and yields retreat (updated) - 08/30/2022 at 08:35
RISE IN VIEW IN EUROPE, THE DOLLAR AND YIELDS DECLINE

RISE IN VIEW IN EUROPE, THE DOLLAR AND YIELDS DECLINE

PARIS (Reuters) – The main eurozone stock markets are expected to rise on Tuesday as the dollar loses some ground and bond yields fall, with markets as a whole beginning to calm down after the shock caused by the last Statements by the Chairman of the US Federal Reserve.

Index futures suggest a rise of 0.44% for the CAC 40 in Paris, 0.27% for the Dax in Frankfurt and 0.34% for the EuroStoxx 50. In London, where markets are remained closed on Monday for a public holiday, the FTSE 100 is indicated down 0.2%.

Wall Street pared losses in late trading on Monday after the sharp drop sparked Friday by Fed Chairman Jerome Powell’s speech on the need for tight monetary policy for “a while” against inflation .

In Europe, investors should also take heed of statements by European Central Bank (ECB) officials suggesting that the ECB could raise rates by three-quarters of a point next week, more than expected so far.

If the rise in the cost of credit remains at the forefront of investors’ concerns, their attention will turn in the shorter term to the monthly report on American employment which is to be published on Friday and which should provide new elements on the evolution of the American economy.

In the immediate future, this Tuesday’s session will be animated, among other things, by the first estimate of inflation in Germany at 12:00 GMT, then by the American consumer confidence index at 14:00 GMT.

AT WALL STREET

The New York Stock Exchange ended lower on Monday but above its session lows: the Dow Jones index fell 0.57%, or 184.41 points, to 32,098.99, the Standard & Poor’s 500 lost 27.05 points, or 0.67%, to 4,030.61 and the Nasdaq Composite fell 124.04 points (-1.02%) to 12,017.67.

The three indices hit their lowest level in a month during the day, still under the influence of Jerome Powell’s statements on Friday.

The CBOE volatility index meanwhile hit its highest level in seven weeks.

In support of the trend, the energy compartment gained 1.54% thanks to the sharp rise in the oil market, driven by information concerning a possible reduction in production by OPEC+ and by tensions in Libya. Exxon Mobil and Chevron gained 2.30% and 0.75% respectively.

Index futures so far suggest an open up 0.2% to 0.4%.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended up 1.14% thanks to the rebound in technology stocks like Tokyo Electron (+1.65%).

In China, the trend is on the contrary downward after the new health restrictions announced in several cities in the face of the increase in COVID-19 cases: the SSE Composite of Shanghai yields 0.44% and the CSI 300 0.33% .

“Despite the decline in the total number of COVID cases, the COVID situation in China may well be worsening,” Nomura analysts said in a note. “Markets could be hit again in the coming weeks, which could lead to another round of downgrades (in growth forecasts) from economists.”

CHANGES

The dollar retreated against the other major currencies (-0.09%) after the 20-year high recorded on Monday, a decline which can be explained, among other things, by renewed interest from forex traders in the euro motivated by speculation on the magnitude of the next rate hike by the European Central Bank (ECB).

The single European currency rose to 0.9999 dollars (+0.04%) against 0.9912 at its lowest on Monday.

RATE

Yields on US Treasuries are falling in Asian trading after the sharp rise of the last two sessions: the two-year returns to 3.4089% after having reached its highest level since late 2007 at 3.489% and the ten-year gives up three basis points at 3.0838%.

On the European market, the ten-year German also fell in early trading to 1.481% after a two-month peak at 1.515%.

OIL

The oil market is erasing some of its gains on Monday, as the market now fears that upcoming interest rate hikes in industrialized countries will eventually weigh on demand for crude.

Brent fell 0.49% to 104.58 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.03% to 96.98 dollars.

(Written by Marc Angrand)

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