Reduction in sight in Europe amid monetary tensions and Chinese slowdown – 07/09/2022 08:33

Reduction in sight in Europe amid monetary tensions and Chinese slowdown – 07/09/2022 08:33

Reduction in sight in Europe amid monetary tensions and Chinese slowdown – 07/09/2022 08:33

MAJOR EUROPEAN STOCK EXCHANGES EXPECT A SIGNIFICANT FALL

MAJOR EUROPEAN STOCK EXCHANGES EXPECT A SIGNIFICANT FALL

PARIS (Reuters) – Major European equity markets are expected to fall sharply on Wednesday after falling on Wall Street and below-expectations for Chinese foreign trade.

Index futures suggest a decline of 1.19% for the CAC 40 in Paris, 0.8% for the Dax in Frankfurt, 0.92% for the FTSE 100 in London and 0.89% for the ‘EuroStoxx 50.

The US ISM service sector activity index was higher than expected at 56.9 for August on Tuesday, a figure interpreted as a further argument in favor of a strong rate hike in the future of the next Federal Reserve meeting. in two weeks.

According to the FedWatch barometer, markets estimate a 75% probability of another three-quarter point hike in the federal funds rate target on September 21, bringing it to 3% -3.25%.

“The good news for the real economy has turned into bad news for the market, whether it’s the bond market or the stock market,” said Redmond Wong, strategist at Saxo Capital Markets in Hong Kong.

The prospect of an accelerated tightening of US monetary policy further fuels investor nervousness as signs of economic deterioration continue to accumulate outside the US.

In China, export growth slowed to 7.1% yoy last month from 18% yoy in July.

In Germany, industrial production fell by 0.3% in July, a slightly less pronounced decline than expected.

To these elements is added, in Europe, the concern raised by the energy crisis, two days before a Council of European Energy Ministers called to examine new measures to reduce gas and electricity consumption.

The next session will be animated among other things by the decisions of the Bank of Canada, which is expected to announce at 14:00 GMT a rate hike of 75 basis points according to the consensus of Reuters, some observers do not rule out an even stronger measure after the 100-point increase decided in July.

A WALL STREET

On Tuesday, the New York Stock Exchange closed a volatile session to the downside following the ISM services index, which fueled the rise in bond yields.

The Dow Jones Index fell 0.55%, or 173.14 points, to 31,145.30, the Standard & Poor’s 500 dropped 16.07 points, or -0.41%, to 3,908.19 and the Nasdaq Composite fell 85.96 points (-0.74%) to 11,544.91.

The Nasdaq now shows seven consecutive sessions of decline, which had not occurred since November 2016.

The CBOE volatility index meanwhile reached its highest level in nearly two months during the session.

Futures on major indices suggest further decline.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index closed 0.71% lower, as fears of a worsening economic situation took precedence over the beneficial effect of the depreciation of the yen on export-oriented stocks.

The Japanese market’s flagship index reached its lowest level of the session since July 19.

In China, the rise in semiconductor values ​​limits the decline by obscuring the disappointment of foreign trade, following the announcement by Beijing of a strengthening of the sector: the Shanghai SSE Composite drops 0.08% and the CSI 300 drops 0 .06%.

CHANGES

Rising for the third consecutive session, the dollar at the beginning of the day recorded a new high in 20 years against a basket of reference currencies (+ 0.31%) and for 24 years against the yen, at 144.38.

Meanwhile, the euro fell below $ 0.99 (-0.09%), very close to the 20-year low recorded on Tuesday at 0.9864.

RATE IT

Continuing its momentum on Tuesday, the 10-year Treasury bond yield in Asia reached its highest level since June 16 at 3.365%.

The two-year period, even more sensitive to expectations of a rise in key rates, remained above 3.5% after reaching 3.551% in the session on Tuesday, the highest since November 2007.

In Europe, the 10-year German Bund yield, the benchmark for the euro zone, exceeded by just over three basis points in early trading at 1.639%, the highest since June 29.

OIL

Expectations of rate hikes and health restrictions in China, two factors that could hold back demand, are dragging the oil market lower after the hike linked to the OPEC + decision to cut production slightly in October.

Brent lost 1.35% to 91.58 dollars a barrel and US light crude (West Texas Intermediate, WTI) by 1.66% to 85.44 dollars.

(Some data may show a slight shift)

(Written by Marc Angrandn with Selena Li in Hong Kong)

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