File photo of London Stock Exchange Group premises in London
by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to fall on Thursday and European stock markets are also trading in the red at mid-session, with market sentiment still weighed down by the latest macroeconomic indicators which are raising fears of continued monetary tightening by central banks on background of high inflation while geopolitical tensions are barely ebbing.
Futures on New York indices signal an opening on Wall Street down 0.69% for the Dow Jones, 0.79% for the Standard & Poor’s 500 and 0.76% for the Nasdaq.
In Paris, the CAC 40 fell by 0.82% to 6,553.31 around 12:45 GMT. In Frankfurt, the Dax lost 0.17% and in London, the FTSE lost 0.56%.
The pan-European FTSEurofirst 300 index fell by 0.52%, the EuroStoxx 50 of the euro zone by 0.56% and the Stoxx 600 by 0.63%.
Some analysts, such as Brian Jacobsen of Allspring Global Investments, believe that the sharper-than-expected rise in US retail sales in October could lead the US Federal Reserve (Fed) to judge that its rate hikes interest rates have not yet produced the expected effect on the economy.
Fed officials such as Christopher Waller and Mary Daly also continue to make comments deemed restrictive, believing that there is still a long way to go in terms of the rise in the cost of credit.
The money markets are counting with a 93% probability on a rate hike limited to half a point on December 14 in the United States, the probability of a rise of three quarters of a point being only 7%. The peak in rates is however seen close to 5% by the summer, against a range of 3.75-4% currently.
JPMorgan economists, for their part, estimate that the Fed should raise rates by 100 basis points by March 2023, while the American economy could register a “mild recession” in the second half of 2023 with the expected continuation of the monetary tightening.
In Europe, inflation in the euro zone was slightly weaker in October than initially estimated, at 10.6% on an annual basis, according to final figures published Thursday by Eurostat, but it remains at a record level.
In the United Kingdom, where inflation reached 11.1%, the highest since 1981, the government on Thursday presented a new draft budget marked by a rise in taxation and cuts in public spending, trying to regain market confidence after the financial storm that eventually forced former Prime Minister Liz Truss to resign last month.
The British government has also announced that it expects the economy to contract by 1.4% next year.
On a geopolitical level, Russia fired a new salvo of missiles on several major Ukrainian cities on Thursday as Kyiv continues to claim that the missile that fell in Poland on Tuesday is not Ukrainian and calls for participation in the ongoing investigation into this incident.
WALL STREET VALUES TO FOLLOW
Nvidia gained 2.8% in pre-market after reporting quarterly sales above expectations on Wednesday evening, driven by solid demand in data centers. Advanced Micro Devices took 0.9% and Intel 0.6%.
Cisco Systems advanced 4% ahead of the stock market after the publication of quarterly results that exceeded expectations, the raising of its annual forecasts and the announcement of a restructuring plan which could affect around 5% of its workforce.
VALUES IN EUROPE
On the stock market, the session was driven by several results from large groups such as Bouygues, which lost 6.14% after giving up its 2023 margin target for its subsidiary Colas in a context of cost uncertainties.
Siemens, on the other hand, confident for the future, jumped 7% after announcing a quarterly profit above expectations and the consolidation of five of its activities into a separate entity.
Burberry’s better-than-expected quarterly sales are also hailed, while Dutch insurer NN Group’s 2025 outlook (-6.97%) is considered disappointing. Thyssenkrupp fell 2.71% as the German group warned that its profit and sales would drop significantly in 2023.
Sector-wise, almost all of the Stoxx 600 compartments are in the red, with basic resources posting the biggest drop (-2%) amid fears of a recession.
The dollar gains 0.52% against a basket of international currencies, in anticipation of a continuation of the rise in rates while several Fed officials, Raphael Bostic, Loretta Mester and Neel Kashkari, must speak this Thursday.
The euro, down 0.52%, is trading at 1.0338 dollars.
The pound sterling fell 0.77% to 1.1816 dollars after the presentation of the new British budget.
Bond yields in the United States are progressing: the ten-year taking nearly three basis points to 3.72% and the two-year showing at 4.36%.
In Europe, the ten-year German Bund yield fell almost three points to 1.97% and the two-year four points to 2.07%, in reaction, according to traders, to the latest statements by two Bank officials. European Central Bank (ECB), Robert Holzmann and Pablo Hernandez de Cos, who plead in favor of increased caution in the monetary tightening of the Frankfurt institution, at the risk of stagflation in the euro zone.
Oil prices are falling on fears over Chinese demand for crude oil amid a resurgence of the COVID-19 outbreak in the country.
Brent fell 1.41% to $91.55 a barrel and US light crude (West Texas Intermediate, WTI) 1.85% to $84.01 a barrel.
(Written by Claude Chendjou, edited by Jean-Michel Bélot)
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