There is a timid rebound on Wall Street, but Europe remains in reserve

from Leticia Volga

PARIS (Reuters) – Wall Street is expected to open moderately higher on Monday, as European stocks remain on a downward trend in the middle of the session after major New York indexes fell on Friday and alarming economic indicators a few days before meeting of the Federal Reserve System. Futures on the index rose 0.36% for the Dow Jones, 0.1% for the Standard & Poor’s-500 and 0.12% for the Nasdaq.

On Friday, Wall Street experienced the biggest drop since 2020, burdened by disappointing results and forecasts from Amazon and renewed concerns about inflation. In Paris, the CAC 40 lost 1.61% to 6428.27 around 11:20 GMT, and in Frankfurt Dax lost 0.94%. British markets will only open on Tuesday, a public holiday in the United Kingdom.

The European index FTSEurofirst 300 fell by 0.82%, the eurozone EuroStoxx 50 by 1.81% and Stoxx 600 by 1.12%.

The latter briefly fell 3% in the morning after a “flashback” in all European stock markets, including Northern Europe, which, according to several market participants, was provoked by a trader’s mistake.

Still, the first session in May for European indices started badly. The final results of a survey of S&P procurement managers in the manufacturing sector confirmed a slowdown in euro area activity due to supply and price problems.

In China, the decline in service and industrial activity intensified in April, increasing pressure on Beijing to take additional measures to support the Chinese economy in the wake of the COVID-19 coronavirus epidemic.

This bad macroeconomic news comes at a time when major central banks intend to tighten their monetary policies to limit inflationary pressures intensified by the war in Ukraine.

Investors expect the Federal Reserve to raise rates by 50 basis points on Wednesday and provide clarification on reducing its balance sheet.

“The Fed’s decisions will come as little surprise … all eyes will be on the instructions in the press release and press conference to point to future speed (strengthening monetary policy),” said Allison Boxer, a PIMCO economist.

Given inflation above 5% in the first quarter and the lack of mention of cuts in the Fed’s recent speech, we believe it should continue to raise its rate by half a point in June. most likely, there will be a “recovery and rebalancing” of the economy, “she added.

The ISM production index for the United States will be published at 14:00 GMT.

VALUES IN EUROPE

The European technology sector fell 2.6% after the Nasdaq fell more than 4% on Friday.

STMicroelectronics and Capgemini fell 3.34% and 3.09%, respectively.

Red lantern CAC 40, luxury group Herm├Ęs (-3.58%) suffers from its influence on the Chinese market.

Bayer, Continental CONG.DE>, BASF and Mercedes-Benz trade without dividends and lose 3.45% to 7.27%.

STOCK EXCHANGES Expecting a faster tightening of monetary policy in the United States, worries about the war in Ukraine and the fall of the euro after mixed PMI indices will benefit.

Its index, which measures its evolution against a basket of reference currencies, rose 0.41% and the euro lost 0.16% to $ 1.0524.

RATES Yields on ten-year Treasury bonds rose by almost three basis points to 2.9163% in the run-up to the Fed meeting.

Its German equivalent fell three points to 0.914% after reaching its highest level since June 2005 at 0.974%.

OIL

Oil prices are in the red, fears of a slowdown in the Chinese economy outweigh fears of cuts in supplies from Russia following a possible embargo from the European Union.

Brent lost 2.49% to $ 104.47 a barrel, and US light crude oil (West Texas Intermediate, WTI) lost 3.03% to $ 101.52.

(Inscription: Letizia Volga, edited by Jean-Michel Belo)