Europe ends in the green, US inflation slows

by Claude Chendjou

PARIS (Reuters) – European stocks ended higher on Wednesday and Wall Street was also in the green mid-session after the release of mixed U.S. consumer price data for April that showed the first slowdown since last August in inflation at an annual rate but also reflect a respite that is no doubt temporary.

In Paris, the CAC 40 ended with a gain of 2.5% to 6,269.73 points. The British Footsie took 1.44% and the German Dax 2.17%.

The EuroStoxx 50 index advanced by 2.62%, the FTSEurofirst 300 by 1.69% and the Stoxx 600 by 1.74%.

The US Department of Labor said on Wednesday that the rise in consumer prices in the United States had slowed significantly in April under the effect of falling gasoline prices.

The consumer price index (CPI) decelerated to 0.3% last month after jumping 1.2% in March and year on year the rise slowed to 8.3% from 8.5% in March.

The publication of this statistic, an hour before the opening of Wall Street, initially frightened investors because so-called core inflation, that is to say, excluding energy and food products, continued to rise. accelerate in April, above economists’ expectations, suggesting that the slowdown in prices was only temporary as pump prices started to rise again this week in the United States, according to data from the American Agency Energy Information System (EIA).

“The data underscores that inflation and rising prices probably haven’t peaked yet,” said Greg Bassuk, managing director of AXS Investments.

However, the money markets now expect 77% on a 75 basis point rise in US Federal Reserve rates against a probability of 81% before the publication of US inflation figures.

In Europe, Christine Lagarde, President of the European Central Bank (ECB), announced on Wednesday that the institution could end its asset purchase program (APP) at the start of the third quarter and raise its rates “a few weeks” later, while inflation in the euro zone last month reached 7.5% over one year.

The rise in consumer prices in Germany was also confirmed on Wednesday at 7.8% over one year in April.

On the bond markets, the yield on ten-year US Treasury bills rose above 3% and that of two years, the most sensitive to changes in rates, took nearly 8 basis points to 2.698% at the closing of the European Stock Exchanges.

The ten-year German Bund yield ended stable at 1.001% and its French equivalent of the same maturity practically unchanged at 1.525%.

VALUES IN EUROPE

Apart from health care (-1%), all the main compartments of the pan-European Stoxx 600 finished in the green, energy (+3.2%), basic resources (+1.9%) and financials (+ 2.1%) having recorded one of the strongest gains.

The oil groups TotalEnergies, Eni and BP took from 2.7% to 4.5%.

In banks, Societe Generale, BNP Paribas and Deutsche Bank advanced by 2.8%, 2.4% and 2.3% respectively, while the banking sector index gained 2.3%.

Side business results, Alstom fell 5.1%, its outlook on its cash has disappointed investors.

Thyssenkrupp, on the other hand, soared 11.2% after raising its annual outlook for sales and operating profit.

The publications of the Italian luxury group Salvatore Ferragamo (+10%) and the collective catering company Compass (+7.3%) were also welcomed, allowing Elior to advance by 5.5% in its wake.

Bayer lost 6.2% after the US administration asked the Supreme Court not to follow up on the German group’s appeal in the Roundup disputes.

AT WALL STREET

At the close in Europe, the Dow Jones advanced 0.78%, the Standard & Poor’s 500 0.58%, while the Nasdaq, which hit an 18-month low this week, fell 0.36 %.

The rise in yields benefits the financial and banking sector, but penalizes technology stocks such as Amazon, Microsoft, Apple, Meta Platforms and Tesla, which fell by 0.2% to 0.8%.

In addition to the banks, the energy compartment (+3.35%) supports the Dow Jones and the S&P-500 while investors fear tensions on the supply of crude.

In earnings releases, Coinbase Global plunged 23% after posting a first-quarter net loss amid a stock market rout.

CHANGES

The dollar, initially at a four-day low against a basket of benchmark currencies, pared losses after the release of US inflation figures.

“Inflation is much higher than expected, especially on the so-called core measure, suggesting underlying inflationary pressures remain sufficiently strong and persistent,” said Karl Schamotta, market strategist at Cambridge Global Payments.

The euro, up 0.23%, trades at $1.0550 as several ECB members, including Banque de France Governor Francois Villeroy de Galhau, confirmed a likely rate hike in the euro. European institution this summer.

OIL

Oil prices are recovering after falling nearly 10% in the past two sessions, buoyed by supply fears as the European Union tries to reach a consensus on new sanctions against Russia.

The barrel of Brent took 4.94% to 107.54 dollars and that of American light crude (West Texas Intermediate, WTI) 5.52% to 105.22 dollars.

(Report Claude Chendjou, edited by Jean-Michel Bélot)