INCREASE IN SIGHT IN EUROPE, US INFLATION IN FOCUS
by Marc Angrand
PARIS (Archyde.com) – The main European stock markets are expected to rise slightly on Monday at the opening, but caution might limit spreads, as market sentiment remains influenced by both expectations of tightening monetary policy by the US Federal Reserve and by the impact of the Omicron variant of the coronavirus.
Index futures suggest an increase of 0.16% for the Dax in Frankfurt, 0.22% for the FTSE 100 in London and 0.31% for the EuroStoxx 50. As for the CAC 40 in Paris, it might take around 0.3% according to the first available indications.
The Parisian market gained 0.93% last week but the European Stoxx 600 index fell 0.32% following closing in the red on Friday in reaction to the monthly US employment report and the first estimate inflation in the euro zone (+ 5% over one year in December).
The US employment report, which shows lower than expected job creations but also a drop in the unemployment rate and a sustained rise in wages, confirmed the scenario of an interest rate hike by the Fed. ‘by March, which might cause the US central bank to start reducing its balance sheet earlier than expected.
“The time already running between raising rates and reducing the balance sheet seems to be shrinking,” said Stephen Gallagher, economist at Societe Generale, in a note. “An advanced rate hike would likely lead to a reduction in the balance sheet by mid-year.”
On the side of the European Central Bank, Isabel Schnabel, one of the members of the executive board, said on Saturday that the ECB might react if the rise in energy prices persisted.
The next big meeting for investors is set for Wednesday with the monthly statistics of US consumer prices, whose annual increase might reach 7% according to the Archyde.com consensus.
The week will also be animated by the hearings of Jerome Powell and Lael Brainard in the Senate before the probable renewal of their mandate at the head of the Federal Reserve.
The markets also continue to monitor the development of geopolitical tensions, especially in Kazakhstan and especially in Ukraine, one of the major topics on the agenda of the USA-Russia summit this week.
A WALL STREET
The New York Stock Exchange ended lower Friday following the publication of the monthly report on employment in the United States.
The Dow Jones index lost 0.01%, or 4.81 points, to 36,231.66, the Standard & Poor’s 500 lost 19.02 points, or 0.41%, to 4,677.03 and the Nasdaq Composite lost fell 144.96 points (-0.96%) to 14,935.90 points.
Technology stocks were once once more penalized by the prospect of a rise in the cost of credit, while financials took advantage.
Over the week as a whole, the S&P lost 1.87%, the Dow 0.29% and the Nasdaq 4.53%, its largest weekly percentage decline since late February 2021.
Futures so far suggest near stability for the Dow Jones and a slight rise for both the S&P and the Nasdaq.
IN ASIA
The Tokyo Stock Exchange remains closed, the day being a public holiday in Japan.
In China, the Shanghai SSE Composite rose by 0.26% and the CSI 300 by 0.25%, thanks in part to technology stocks: the STAR index rose 0.75% in reaction to the statements of the stock market authorities on their will. reform this market and improve its liquidity.
In Hong Kong, where the Hang Seng takes 0.73%, the real estate group Shimao Group jumped 8.72% following reports that it has put all of its construction projects up for sale.
CHANGES / RATES
The dollar, which has just followed three consecutive weeks of decline, is well oriented once morest the other major currencies (+ 0.24%), a movement favored both by the expectations of higher interest rates from the Federal Reserve and by the geopolitical tensions of the moment.
The euro fell back to $ 1.1331 (-0.25%), wiping out regarding half of its gains on Friday.
On the bond side, the yield on ten-year US Treasuries ended Friday at 1.7655% following having reached in session, at 1.801%, its highest level in two years.
OIL
Crude prices are stabilizing following rising 5% last week, supported by risks related to tensions in Kazakhstan and the temporary decline in Libyan production.
Brent gained 0.04% to 81.72 dollars a barrel and US light crude (West Texas Intermediate, WTI) was virtually unchanged (+ 0.01%) at 78.89 dollars.
NO MAJOR ECONOMIC INDICATOR ON THE JANUARY 10 AGENDA
(Written by Marc Angrand, edited by Blandine Hénault)
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