NO REST FOR EQUITIES, DROP IN YIELDS
by Marc Angrand
PARIS (Archyde.com) – Wall Street is expected to be in the red and European stock markets widen their losses mid-session on Tuesday, as the continued fighting in Ukraine and the future economic impact of sanctions once morest Moscow continue to weigh on market sentiment while that the downward revision of rate hike expectations is causing bond yields to fall once more.
Futures on major New York indices are signaling an opening down 0.71% for the Dow Jones, 0.87% for the Standard & Poor’s 500 and 0.94% for the Nasdaq.
In Paris, the CAC 40 lost 3.27% to 6,441.32 points at 12:00 GMT following briefly moving into positive territory early in the morning and is approaching its lowest point last Thursday (6,432.89). In London, the FTSE 100 lost 1.15% and in Frankfurt, the Dax fell 2.83%.
The EuroStoxx 50 index is down 3.14%, the FTSEurofirst 300 by 1.71% and the Stoxx 600 by 1.98%.
On the sixth day of the invasion operation launched by Russia, a column of Russian armor extended on Tuesday for sixty kilometers in the direction of Kiev, the Ukrainian capital, and the bombardments intensified on several major cities of the country.
Despite heavy international sanctions, Moscow intends to continue its “military operation” until its objectives are achieved, said Defense Minister Vladimir Putin.
Beyond the situation on the ground, investors fear the economic fallout from the conflict and sanctions. Stéphane Monier, investment director of Lombard Odier, explains in a note that he expects a loss of one point of growth for the euro zone this year, citing “profound consequences for growth and global financial markets”.
In this context, the final results of the PMI surveys of purchasing managers in the manufacturing sector, which confirm the maintenance of sustained growth in February, went virtually unnoticed.
RATE
Alongside the fall in equities, the fact of the day is the marked relapse in government bond yields, a consequence of renewed risk aversion but above all of the downward revision of interest rate expectations.
The market no longer believes much in the hypothesis of a 50 basis point increase in the US “fed funds” rate on March 16, the date of the next decisions by the Federal Reserve, a hypothesis that was once favored.
As for the European Central Bank (ECB), it should raise its rates by only 25 basis points by the end of the year, once morest 30 points on Monday and 40 before the invasion of Ukraine, in view of the money market positions.
German government bond yields are heading for their biggest one-session decline since 2016, with the ten-year falling back into negative territory for the first time since Feb. 1, down more than 15 basis points from at its closing level on Monday.
The ten-year American fell more than ten points to 1.7377%, the lowest since January 25.
Investors are waiting at 13:00 GMT for the first estimate of inflation in Germany in February.
VALUES IN EUROPE
The fall in bond yields is once once more penalizing banks, already hurt by their exposure to Russia: the Stoxx index of banking stocks in the euro zone lost 4.66% and fell to its lowest level since July.
In Paris, Crédit Agricole lost 6.68%, Société Générale 7.16% and BNP Paribas 4.72%. In Milan, Intesa Sanpaolo 5.12 drops 5.12% and in Amsterdam, ING is down 6.28%.
Once once more, only defensive and defense stocks manage to do well, like Thales, the only increase in the CAC 40 (+5.15%).
In the news of the results, Bayer (+0.85%) benefits from a publication higher than expectations while Atos falls by 15.9% following forecasts considered disappointing by certain analysts and the announcement of the next departure of its financial director.
CHANGES
The calm of the beginning of the day on the currency market did not last and the dollar, a time oriented downwards, appreciated once more once morest the other major currencies (+0.21%).
The euro (-0.39%) thus fell to 1.1175 dollars following a peak at 1.1233.
The ruble nevertheless recovered a little ground, at 97.036 for the dollar once morest 110 at its low on Monday (but less than 80 a week ago).
OIL
The oil market, if it remains below its recent highs of seven years, is once more on the rise, overtaken by fears of tensions on the offer in the event of a stoppage of Russian exports.
Brent gained 5.11% to 102.98 dollars a barrel and US light crude (West Texas Intermediate, WTI) 4.1% to 99.64 dollars.
(XXXX report, French version Marc Angrand)
