EUROPEAN STOCK MARKETS LOSING AROUND 2% AT MID-SESSION
PARIS (Reuters) – Wall Street is expected to fall sharply and European stock markets lost around 2% at mid-session on Monday, as investors continued to desert equities in the face of major uncertainties at the moment over inflation and rising interest rates. interest, perceived as a threat to already fragile growth.
General jitters two days ahead of the US Federal Reserve’s decisions are driving the dollar higher at the same time, and it has caused a brief inversion in the Treasury yield curve.
Futures contracts on the main New York indices point to a decline of 1.76% for the Dow Jones, 2.13% for the Standard & Poor’s 500 and 2.67% for the Nasdaq. These declines were barely less than those suffered on Friday in response to the new 41-year high in US inflation, which rekindled fears of a 75 basis point hike in Fed rates on Wednesday as markets had integrated “only” 50 points of increase.
US stocks remain on their worst weekly performance since January, with the S&P-500 falling 5.06% in five sessions.
In Paris, the CAC 40 lost 2.17% to 6052.82 points around 11:00 GMT, the lowest since March 8. In London, the FTSE 100 lost 1.74% and in Frankfurt, the Dax fell 2.01%.
The EuroStoxx 50 index is down 2.28%, the FTSEurofirst 300 2.12% and the Stoxx 600 2.16%. The latter, at its lowest for three months, is thus heading towards its fifth consecutive session of decline.
The CBOE volatility index, up almost five points, is at its highest since May 20 and its European equivalent at its highest since May 13.
“There is a lot of uncertainty (…) less growth, more inflation, and the fear that central banks are pressing hard on the brakes”, summarizes Elwin de Groot, senior economist at Rabobank.
The Stoxx 600 is less than 2% from its low for the year, hit on March 7, and is down almost 17% from its record early January.
Added to inflation and rising interest rates is the fear of new health restrictions in Beijing after the discovery of a “cluster” in a bar.
WALL STREET VALUES TO FOLLOW
on the US bond market, the yield on two-year securities briefly rose above ten years for the first time since April, an inversion of the curve considered by some investors as a reflection of a risk of recession.
The two-year jumped nearly 15 basis points to 3.1952% and the ten-year nearly nine points to 3.2383%.
In Europe, where the markets continue to revise upwards their expectations of a rise in rates from the European Central Bank (ECB), the ten-year German posted an increase equivalent to that of the American at 1.572%.
Above all, the ten-year yield spread (“spread”) between Germany and Italy is close to 240 basis points, its highest level since May 2020. The Italian ten-year has in fact crossed 4 % for the first time since January 2014.
VALUES IN EUROPE
On the equities side in Europe, where the fall is sparing no sector, the most marked declines are for the commodities compartment, whose Stoxx index fell by 4.17% with the drop in base metal prices, and that high technologies (-3.71%), one of the most sensitive to rising rates.
In Paris, STMicroelectronics sells 4.45% Dassault Systèmes 4.04%, Eramet 6.99%.
The banking sector lost another 2.31%, still affected by fears of fragmentation in the euro zone and the sharp rise in so-called peripheral yields, two factors to which are added, for French banks, doubts about Emmanuel’s ability Macron to have a parliamentary majority after the legislative elections: BNP Paribas gives up 3.92%, Crédit Agricole 4.05% and Société Générale 4.03%.
Up, Thales gains 1.43% after the agreement to 555 million euros between France and Australia on compensation for the breach of the contract for the delivery of 12 submarines.
The dollar continues to benefit, against the other major currencies (+0.53%) from anticipations on the Fed as well as from the marked aversion to risk.
The main victim of the current climate on currencies remains the yen, which fell to its lowest level since 1998 against the dollar. The euro, down 0.47%, fell below 1.05 dollars for the first time since May 19.
The situation is more tense in the cryptocurrency market, where the decline was accentuated by the announcement by the Celsius platform of the freezing of withdrawals: bitcoin fell by 9.79% and Ether by 14.68% .
The fear of a new epidemic outbreak in Beijing, which calls into question the recovery of Chinese demand, accentuates the drop in crude prices linked to general fears of an economic slowdown: Brent drops 1.34% to 120.38 dollars on barrel and US light crude (West Texas Intermediate, WTI) 1.42% to 118.96 dollars.
(Written by Marc Angrand, with Sruthi Shankar in Bangalore)