NET DROP IN SIGHT IN EUROPE TO START A WEEK AT RISK
by Marc Angrand
PARIS (Archyde.com) – The main stock markets in the euro zone are expected to fall sharply on Monday after Wall Street’s sharp drop on Friday and two days before the decisions of the United States Federal Reserve, in a context still marked by the tightening of monetary policies, slowing global growth, inflation and the war in Ukraine.
Futures contracts on indices suggest a fall of -1.12% for the Dax in Frankfurt and -1.28% for the EuroStoxx 50 while the CAC 40 in Paris could yield around 1.2% according to the first directions available.
British markets will not reopen until Tuesday, the day being a public holiday in the United Kingdom. Markets in China, India and several Southeast Asian countries are also closed.
Major European indices ended higher on Friday for the third consecutive session before Wall Street posted its worst performance in nearly two years after a series of below-expected results in the key high-tech sector and the announcement of a further acceleration of the PCE inflation index, the most watched by the Federal Reserve.
The weekend’s economic news is also hardly encouraging: the official Chinese PMI indices published on Saturday pointed to a worsening contraction in activity in both the manufacturing and services sectors in April, a consequence of health restrictions. massive measures decided by Beijing to try to curb the epidemic of COVID-19.
The Fed could raise its main interest rate by half a point on Wednesday and should clarify its intentions in terms of reducing its balance sheet. More generally, the tone of the speech that its president, Jerome Powell, will hold could influence the evolution of the markets in the short term.
“Investors are now expecting a rate hike of 50 basis points (bps) at Wednesday’s meeting and … 75 bps in June, which would be a first since 1994!”, underlines John Plassard, of Mirabaud Securities.
The Bank of England is meeting for its part on Thursday and should continue the upward trend in rates already well under way in the face of the acceleration in the rise in prices.
In the meantime, the coming session will be punctuated by the publication of the final manufacturing PMI indices in the euro zone and the American manufacturing ISM.
A WALL STREET
U.S. stock markets had their worst session since 2020 on Friday as worrying inflation numbers came on top of disappointing news from Amazon, one of Wall Street’s largest capitalizations.
The Dow Jones index ended down 2.77%, or 939.18 points, at 32,977.21, the Standard & Poor’s 500 lost 155.71 points (-3.63%) at 4,131.79 and the Nasdaq Composite plunged 536.89 points (-4.17%) to 12,334.64.
The S&P 500 thus posted its largest single-session drop since June 2020, the Nasdaq since September 2020.
Amazon fell by 14.05% and Apple by 3.66% the day after the publication of their quarterly results.
April ended with a 13% decline for the Nasdaq, its worst monthly performance since the 2008 financial crisis.
Index futures so far suggest a rebound of around 0.5% for the Dow and S&P 500 and 0.7% for the Nasdaq.
IN ASIA
At the Tokyo Stock Exchange, the Nikkei index gained 0.25% and the broader Topix 0.15% less than an hour from the close, as caution limited spreads before the three-day closing of the ” Japanese Golden Week”, which will prevent Japanese investors from reacting hotly to the events of the coming days.
Technology suffers from the sharp decline of the Nasdaq on Friday, like Tokyo Electron, which gives up 0.67%, Advantest (-3.89%) or Fanuc (-1.83%).
EXCHANGES/RATES
The dollar is rising again against other major currencies (+0.50%) after suffering profit taking on Friday for the last session of April, which ended with a gain of 4.7%, its best monthly performance since January 2015.
The euro fell (-0.25%) but remains above $1.05 for the time being.
OIL
The oil market retreats in reduced trading in the absence of many Asian investors, concerns over slowing growth in China, the world’s largest importer, once again outweighing the risk of an embargo from the European Union on Russian crude.
Brent fell 1.1% to 105.96 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.01% to dollars.
(Written by Marc Angrand)