Emergence in Europe, fears of inflation are growing

from Leticia Volga

PARIS (Reuters) – Major European stock markets are expected to fall on Monday as recent inflation in the United States has revived fears of an aggressive tightening of monetary policy by the Federal Reserve, while the health situation in Beijing is mounting uncertainty for the world. growth.

Futures contracts show a 2.09% decline for Paris CAC 40, 1.72% for Dax in Frankfurt, 1.05% for FTSE in London and 1.86% for EuroStoxx 50.

Thus, the trend should be negative again in Europe, which is still affected by more than expected consumer price increases in the United States, as the announcement of monetary policy from the Federal Reserve (Fed) on Wednesday.

Investors fear that the acceleration of inflation to 8.6% during the year in the United States, the highest level since December 1981, will force the US Federal Reserve to tighten its monetary policy with the risk of stopping the economy.

Markets estimate the chances of a Fed rate increase of half a point on Wednesday by 80% and an increase of 75 basis points by 20%.

The Bank of England (BoE), meeting with its committee on Thursday, is also set to raise its base rate for the fifth time since December.

Concerns about the global economy are exacerbated by the COVID-19 crisis in China. Beijing’s most populous district, Chaoyang, announced several large-scale test campaigns Sunday to stop the spread of the coronavirus.

VALUES TO BE TREATED:

ON VOL STREET

The New York Stock Exchange on Friday ended with a fall after the publication of statistics confirming the intensity of inflation in the United States.

The Dow Jones fell 2.73% to 31,392.79 points, the S&P-500 lost 2.91% to 3,900.73 points, and the Nasdaq Composite fell 3.52% to 11,340.02 points.

During the week, S&P lost 5.06%, Dow – 4.58%, and Nasdaq – 5.60%, thus becoming the worst week since January 21.

Currently, futures contracts indicate a decrease of 1.46-2.32% at the time of opening.

IN ASIA

Falling on Wall Street on Friday affected a trend in Asia, where Nikkei on the Japanese Stock Exchange lost 3.01%, falling below 27,000 points for the first time in two weeks.

In China, the Shanghai SSE Composite lost 1.52% and the CSI 300 1.8%.

RATE

Sales in the US bond market continue for the fourth consecutive session after inflation rose, prompting higher yields.

Ten-year Treasury bonds rose more than the baseline to 3.1687% after a five-week peak of 3.202%. The two-year figure rose by ten basis points to 3.1409%, reaching its highest level since December 2007.

In Europe, the yield of the German Bund fell slightly at the beginning of trading, to 1.489%.

CHANGES

The dollar rose 0.34% against a basket of reference currencies and peaked against the yen since 1998 at 135.17.

“Rising foreign profitability and energy prices, along with constant reports from the Bank of Japan, pushed the dollar / yen to a more than 20-year high,” Barclays analysts said.

At the same time, the euro lost 0.3% to about $ 1,048.

The British pound fell against the dollar and the euro after the British economy unexpectedly contracted by 0.3% in April, while the Reuters consensus forecast growth of 0.1%.

As for cryptocurrencies, bitcoin has fallen to its lowest level since December 2020 to $ 24,888.88, as the Celsius Network announced that it will stop withdrawals and transfers between accounts due to “extreme market conditions.”

OIL

The oil market is trading in the red, as the surge in COVID-19 in Beijing has shattered hopes for a speedy recovery in China’s oil demand amid concerns about the global economic outlook and rising inflation in the United States.

Brent fell 1.72% to $ 119.91 a barrel, and US light oil (West Texas Intermediate, WTI) fell 1.79% to $ 118.51.

METALS

General risk aversion and concern over China’s health crisis are affecting base metal prices: aluminum has reached a six-month low of $ 2,643.50 per tonne and copper a new two-week low.

Iron ore futures prices in the Dalian market in China are also falling. The September contract reached an almost two-week low of 891 yuan.

(Inscription: Leticia Volga, edited by Bertrand Busi and Kate Entringer)