Shares are rising ahead of the ECB and the Fed

Claude Chengju

PARIS (Reuters) – Wall Street is expected to rise on Wednesday before the US Federal Reserve (Fed) and European stock markets develop green in the middle of the session, through banking stocks, while the European Central Bank (ECB) )) convened an emergency meeting to discuss the recent sale of European government bonds. Futures on New York indices signal the opening on Wall Street by 0.46% for the Dow Jones, 0.82% for the Standard & Poor’s 500 and 1.05% for the Nasdaq. In Paris, CAC 40 rose 1.04% to 6011.43 around 11:45 GMT. In Frankfurt, Dax is up 1.18%, and in London FTSE is up 1.32%.

The pan-European FTSEurofirst 300 rose 1.18%, the EuroStoxx 50 rose 1.27% and the Stoxx 600 rose 1.17%.

The ECB has decided to convene its Governing Council as a matter of urgency, as the evolution of borrowing costs in the currency bloc has recently been marked by a clear gap between Germany’s prices, the country’s safest issuer, and heavily indebted countries such as Italy.

Thus, the spread of profitability (“spread”) between the ten-year German Bund and its Italian equivalent reached 252.9 basis points on Tuesday, the highest level since April 2020. On Wednesday, the spread returned to about 230 points before the end. ECB meeting.

“Obviously, the market is expecting some intervention,” said Teuwe Mevissen, a senior strategist at Rabobank, while Christine Lagarde, the ECB’s president, said last week that the institution would introduce a new tool to avoid any fragmentation.

According to sources directly informed, the ECB’s press release should be published early in the afternoon after its meeting, which began at 9:00 GMT.

In the United States, monetary policy decisions from the Fed are also expected at 18:00 GMT after a two-day meeting, while the president of the institution Jerome Powell is due to speak in the afternoon, an hour later.

Following the announcement of consumer prices in the United States on Friday, where inflation was higher than expected, markets now estimate a 99.7% probability of a Fed rate increase of 75 points this Wednesday, according to the Fedwatch CME Group barometer.

As for the economic statistics of the day, the Ifo Institute of Economics announced on Wednesday that it now expects Germany’s gross domestic product (GDP) to grow by 2.5% this year against a forecast of 3.1% in March, while inflation is expected at 6.8% and no longer 5.1%.

In the euro area, the trade deficit nearly doubled to € 32.4 billion in April, while industrial production slowed more than expected to 0.4% over the same period.

VALUABLE VALUE STREET VALUES

Qualcomm rose 0.6% in the previous market after a European Union court overturned a $ 997 million fine imposed on it by the European Commission four years ago for securing exclusive supplies of Apple chips.

VALUES IN EUROPE

On the European Stoxx 600, except for energy (-0.4%), all major compartments are in the green, and finance (+ 1.8%) is in the lead. The banking division, which recently suffered from mass sales of Italian bonds, rose 3.1%.

In Rome, Unicredit, Intesa Sanpaolo and BPER Banca rose from 4.6% to 6%, while in Paris Société Générale, BNP Paribas and Crédit Agricole won from 3% to 3.5%.

Excluding finances, H&M, which posted higher-than-expected second-quarter sales on Wednesday, lost 4.1 percent as investors worried about the group’s profits and sales, which remained lower than before, the COVID-19 pandemic. Its competitor Inditex brings 0.1%.

However, the Swiss chemical group Clariant, which grew by 2.2%, due to a 30% jump in its turnover in the first quarter.

RATES Bond yields in the euro area fell sharply after the announcement of the ECB meeting.

The rate of ten-year Italian bonds, peaking at 4.305% since 2013, fell 27.6 basis points to 3.942% and is approaching the biggest drop in a single session since March 1.

Its German equivalent of the same maturity fell by six basis points to 1.669%.

The French OAT fell 11 points to 2.262%.

In the United States, the yield on ten-year US Treasury bonds fell 11 points to 3.3715% after reaching its highest level since April 2011 at 3.488% on Tuesday.

CHANGES

In the foreign exchange market, the euro, which rose 0.61% to $ 1.0478, benefited from the announcement of an extraordinary meeting of the ECB, but remains vulnerable to the dollar while awaiting a decision from the US Federal Reserve.

“We have some relief against the euro this morning through the ECB, but other than that, the dollar remains stable,” said Nordea analyst Niels Christensen. “We expect more restrictive monetary policy in the eurozone, but even more restrictive in the United States, and this will be an important factor for the dollar against the euro,” he added.

The index, which measures the dollar’s fluctuations against a basket of reference currencies, lost 0.69% after hitting its highest level since December 2002.

OIL

Oil prices are falling as concerns about the economy and demand outweigh supply tensions over the Fed’s interest rate decision.

A barrel of Brent fell 0.57% to $ 120.48, and US light crude oil (West Texas Intermediate, WTI) lost 0.61% to $ 118.19.

(Written by Claude Chengju, edited by Kate Entringer)