EUROPEAN STOCK MARKETS END LOWER
by Claude Chendjou
PARIS (Archyde.com) – European stock markets ended lower on Thursday and Wall Street was also trading in the red mid-session, as expectations of a hike in interest rates rose, fears of a recession and earnings disappointing quarterly results from two major US banks that stifled all risk taking.
In Paris, the CAC 40 ended down 1.41% at 5,915.41 points. The British Footsie lost 1.43% and the German Dax 1.86%. In Milan, the FTSE-MIB lost 3.33%, the decision of the 5-Star Movement (M5S) not to participate in the vote of confidence on Thursday raising fears of the fall of the government led by Mario Draghi.
The EuroStoxx 50 index fell by 1.63%, the FTSEurofirst 300 by 1.46% and the Stoxx 600 by 1.48%.
The European Commission has revised its growth forecasts downwards and inflation forecasts for the euro zone upwards, mainly due to the impact of the war in Ukraine.
In the United States, following the unexpected data for consumer prices for the month of June announced on Wednesday, those for producer prices also came out above expectations on Thursday, the index having increased last month by 1.1 % and 11.3% at an annual rate, a sign of persistent inflation.
The shock caused on Wednesday by the sharp rise in consumer prices (+9.1% over one year, the highest since 1981) led some investors to anticipate a 100 basis point hike on July 27 in Reserve rates. federal government, a rapid pace that might cause a significant slowdown in the economy.
“The fear of a recession continues to be at the forefront of investors’ minds,” said Bert Colijn, economist at ING.
“Investors are clearly of the view that the boat has left port and that it is now a question of ensuring that any recession is shallow and brief,” added Craig Erlam, analyst at OANDA.
To these concerns were added those linked to the first results of the banks, JPMorgan and Morgan Stanley having published quarterly profits on Thursday lower and below expectations, in a context of rising provisions for the first and high market volatility for the second. .
“All the things you don’t want to see, you pretty much get them all: lower-than-expected numbers, lower share buybacks and higher credit reserves all signal a recession rather than a recession. ‘a one-time air pocket,’ commented Thomas Hayes, chairman of Great Hill Capital.
“The market doesn’t like it and rightly so,” he added.
A sign of nervousness in the markets, the index measuring volatility rose to 27.35 points in the United States, while in Europe it ended close to 32 points for the first time in a month.
A WALL STREET
At the close in Europe, the Dow Jones fell 0.99%, the Standard & Poor’s 500 0.90% and the Nasdaq 0.71%.
On a sectoral level, the banking compartment (-2.7%) posted one of the largest declines with JPMorgan and Morgan Stanley losing 3.88% and 0.87% respectively, while Wells Fargo, Goldman Sachs, Citigroup and Bank of America fell from 1.67% to 3.62%.
The energy, materials and financials sectors are also down.
VALUES IN EUROPE
In Europe, except transport and leisure (+0.54%), all the main sectors finished in the red, basic resources (-3.58%) and energy (-3.7%), penalized by concerns regarding demand, and the bank (-2.98%), affected by the results of JPMorgan and Morgan Stanley, showing one of the largest declines.
In corporate earnings news, Ericsson fell 8.67% as the Swedish group’s second-quarter margins suffered from higher component prices and logistics costs.
Swatch Group fell 0.56%, despite the confirmation of its annual outlook, while fashion group Hugo Boss (+2.36%) was supported by the increase in its forecast for annual turnover.
RATE
Bond yields continued to rise on Thursday, driven by US inflation data and the rise in money markets to 160 basis points in ECB rates by the end of the year.
The ten-year German Bund rate ended at 1.165% and the two-year rate at 0.469% following hitting a session high since July 4 at 0.637%.
In Italy, the ten-year yield ended at 3.378% following soaring in session by 19 points to 3.502%, its strongest increase in one session since June 13. The yield spread (spread) between ten-year German bonds and those of Italy of the same maturity, however, rose to 220.3 points once morest 208 on Wednesday, in reaction to increased political risk in Rome.
The yield on ten-year US Treasuries gained regarding five basis points to 2.9614% and the two-year one was stable at 3.1424%, reflecting an inversion of the curves, a sign of an increased risk of recession at one point. two-year horizon. The two rates, however, reduced their gains following the statements of Christopher Waller, one of the governors of the American Federal Reserve (Fed), who said on Thursday that he supported for the moment a new increase in the cost of credit of only 75 basis points. this month.
EXCHANGES The dollar, supported by its status as a safe haven asset and expectations of a rate hike in the United States, advanced by 0.74%, once morest a basket of reference currencies and hit a new high of nearly 20 year.
Against the Japanese currency, the greenback hit a 24-year high, above 139 yen.
The euro, which briefly fell below parity with the dollar on Wednesday, is trading at 1.0038 (-0.22%) on Thursday.
OIL
Oil prices are falling on the prospect of a rate hike which might plunge the economy into recession and weigh on demand.
Brent fell 2.76% to 96.82 dollars a barrel and US light crude (West Texas Intermediate, WTI) 3.22% to 93.2 dollars.
(Written by Claude Chendjou, edited by Sophie Louet)
