Stability for European stocks in the long run

from Leticia Volga

PARIS (Reuters) – Major European stock markets are expected to open slightly on Friday, despite declining indexes on Wall Street the day before due to fears about rising US rates, inflation and economic prospects.

Futures contracts show a 0.02% increase for CAC 40 in Paris, a 0.01% increase for Dax in Frankfurt and a 0.15% decrease for FTSE in London.

European indices closed in the red on Thursday after the opening of sharp growth, as investors were initially reassured by statements by Fed Chairman Jerome Powell, who rejected the prospect of future rate increases by 75 basis points.

But gains are slowly waning, with optimism giving way to skepticism about the US Federal Reserve’s ability to curb rapid inflation without hurting economic growth, already weakened by the war in Ukraine and health care restrictions in China.

“The risk of political error remains high: either the Fed is not tightening monetary policy fast enough to fight inflation, or it is too aggressive, leading to the end of the current economic cycle,” said David Chao, the company’s strategist. Invesco.

The market at 12:30 GMT publishes monthly employment data in the United States. According to the Reuters consensus, the number of new jobs was expected to decline in April, which would create 391,000 jobs after 431,000 in March.

ON VOL STREET

The New York Stock Exchange fell sharply on Thursday, erasing its gains from the previous day, as investors fear that the rate increase announced by the Fed will be insufficient to counter inflation, which will force the central bank to take more decisive action in the future.

The Dow Jones fell 3.12% to 32,997.97 points, the S&P-500 lost 3.56% to 4,146.87 points, and the Nasdaq Composite fell 4.99% to 12,317.69 points.

The Nasdaq index recorded the worst session since June 2020, ending with the lowest since November 2020. The Dow Jones index, for its part, had its worst session since October 2020.

Alphabet, Apple, Microsoft, Meta Platforms, Tesla and Amazon fell 4.3-8.3%.

But risk aversion has not only affected high-growth stocks, which have been experiencing difficulties since the beginning of the year due to fears about the potential impact of higher rates on their growth. All eleven major sectors of the S&P-500 declined.

At the moment, futures are forecasting a slightly higher Friday session.

IN ASIA

On the Tokyo Stock Exchange, which reopened after a three-day break, Nikkei rose 0.69%, thanks to shares in the financial and energy sectors, while the technology department took the brunt of the fall on Wall Street the day before.

In China, the CSI300 fell 2.52% and the Shanghai Composite Index fell 2.23%, which was also punished by Wall Street and the Chinese government’s determination to support a zero-COVID-19 policy.

RATE

Ten-year Treasury bond yields fell slightly to 3.0493% after crossing the 3.1% threshold on Thursday for the first time since November 2018.

Its German equivalent fell by two basis points at the beginning of trading to 1.019%.

CHANGES

The situation is calm on the stock exchanges, where the dollar is stable against a basket of reference currencies after a sharp rebound the day before and reached a new high of 20 years.

The euro fell 0.2% to about $ 1.0513.

The pound stabilized against the dollar after falling 2% on Thursday to its lowest level in almost two years after statements by the Bank of England on monetary policy, which painted a pessimistic picture for the British economy and warned of the risk of recession.

OIL

Oil prices are rising for the third consecutive session, as fears about a proposal for a possible European embargo on Russian imports are currently outweighed by the uncertainty associated with global economic growth.

Brent rose 0.69% to $ 111.66 a barrel, while US West Light Intermediate (WTI) rose 0.68% to $ 109.

(Inscription: Leticia Volga, edited by Tangi Saloun and Kate Entringer)