RED IN SIGHT, CENTRAL BANKS AND RESULTS IN SIGHT
by Claude Chendjou
PARIS (Archyde.com) – The main European stock markets are expected to open lower on Tuesday in the wake of Asian markets and Wall Street, penalized late Monday evening by banks, new technologies and real estate, investors doubling caution in expectation of the publication this week of new corporate results, decisions of two major central banks and new economic indicators.
According to the first indications available, the Eurostoxx 50 should decline by 0.6%, the Parisian CAC 40 by 0.7%, the Dax in Frankfurt by 0.5% and the FTSE in London by 0.4%.
The final inflation figures for the month of June in the euro zone will be published at 09:00 GMT. Consensus calls for a 0.8% rise month-on-month and an 8.6% rise year-on-year, an acceleration that might weigh on decisions by the Governing Council of the European Central Bank (ECB) , which will be known on Thursday.
The Bank of Japan’s monetary policy statement is also due on Thursday.
The European Commission (EC) was pessimistic regarding growth and inflation last week, stressing that inflation might be even higher if gas prices spike once more if Russia halts deliveries.
As uncertainties remain over the reopening of the Russian gas pipeline Nord Stream 1, officially under maintenance until July 21, according to a letter from Gazprom, dated July 14 and seen by Archyde.com on Monday, the Russian group declared a case of force majeure on gas deliveries to Europe to at least one major customer.
A postponement of the return to service of the gas pipeline, once morest the backdrop of the war in Ukraine, might lead to a shortage of gas supplies and keep prices high.
In the United States, while several officials of the American Federal Reserve have reassured on the pace of the rise in interest rates, investors continue to show caution following the mixed results of the major American banks while the quarterly accounts of several digital giants are expected this week, like Netflix on Tuesday and Tesla on Wednesday.
IBM (-4.4% in following-hours trading), for its part, reported Monday evening a quarterly turnover higher than expected but the IT group warned that it might suffer an impact of around 3 $.5 billion this year linked to the strength of the dollar.
Of the 40 S&P-500 companies that have already reported second-quarter results, 80% beat expectations, according to Refinitiv data, compared with 81% in the past four quarters.
A WALL STREET
The New York Stock Exchange ended lower on Tuesday, affected by fears over Apple and the reversal at the end of the session of the banking compartment (-0.53%) which lost all its initial gains linked to the publication of quarterly accounts from Goldman Sachs and Bank of America.
The Dow Jones index fell 0.69% to 31,072.61 points, the S&P-500 0.84% to 3,830.85 points and the Nasdaq Composite 0.81% to 11,360.05 points.
In stocks, both banks ended in the green but gave away much of their early trading gains, with analysts pointing to lower quarterly profit and Goldman Sachs warning of a slowdown in spending.
Apple, for its part, fell more than 2% as Bloomberg reported that the group is also considering slowing growth in hiring and spending next year due to a possible deterioration in the economic conditions.
IN ASIA
The Tokyo Stock Exchange ended Tuesday up 0.65% following three days of closing.
The MSCI index comprising stocks from Asia and the Pacific (excluding Japan), for its part, lost 0.64%, returning to its two-year low hit last week.
The technology groups Alibaba (-2.8%), Samsung (-1.8%) and Nintendo (-2.5%) are weighing on the trend, in the wake of Apple on Wall Street.
In China, the SSE Composite nibbles 0.07% but the CSI 300 gives up 0.47% as the country reports 776 new cases of coronavirus contamination, rekindling fears of new health restrictions.
RATE
Bond yields in Europe fell: that of the ten-year German Bund lost two points to 1.190% and its French equivalent of the same maturity was 1.798% (-2.8 points).
The rate of ten-year Italian bonds is stable at 3.381% and the ten-year yield spread (“spread”) between Germany and Italy has fallen to 217.8 points following reaching a peak of one month at 234.50 due to political risk in Rome.
CHANGES
The dollar index, measuring the fluctuations of the greenback once morest a basket of other reference currencies, is almost unchanged (-0.04%), but it remains down from its 20-year peak reached last week, the Forex traders lowered expectations of a one percentage point Fed rate hike next week.
Against the yen, the dollar is slightly below the 24-year high of 139 yen also reached last week. The euro rose 0.14% to 1.0155 dollars and moved away from parity with the greenback.
OIL
Oil prices, which gained almost 5% on Monday, are without a clear direction, alternating slightly higher or lower according to concerns regarding supply and fears of a drop in demand.
The barrel of Brent fell 0.05% to 106.22 dollars, while American light crude (West Texas Intermediate, WTI) nibbled 0.03% to 102.63 dollars.
(Edited by Claude Chendjou, edited by Kate Entringer)
