Rebound in Europe while waiting for the Fed, fears about energy recede

by Claude Chendjou

PARIS (Reuters) – Wall Street is expected without much change on Wednesday before the publication of the minutes of the last meeting of the American Federal Reserve, while European stock markets evolve in the green at mid-session.

The positive trend is supported by bargain buying and the end of the strike in the Norwegian energy sector, which allows gas prices to fall sharply.

Futures on New York indices signal an opening on Wall Street down 0.2% for the Dow Jones, 0.3% for the Standard & Poor’s 500 and 0.4% for the Nasdaq.

In Paris, the CAC 40 advanced by 1.51% to 5,882.65 around 11:50 GMT. In Frankfurt, the Dax takes 1.28% and in London, the FTSE 1.79%.

The pan-European FTSEurofirst 300 index gained 1.58%, the eurozone’s EuroStoxx 50 1.45% and the Stoxx 600 1.46%.

The end of the strike in the oil and gas sector in Norway after the intervention of the government removes the specter of a drop in natural gas deliveries from Saturday and therefore of a new surge in prices. Wholesale natural gas prices in the UK market were down sharply on Wednesday morning, with the benchmark contract for overnight delivery falling 102 pence to 163 pence, while the contract for same-day delivery fell 110 pence to 155 pence.

The rebound in equity markets in Europe remains fragile, however, with inflation and the risk of a recession still present, especially as data released by Eurostat on Wednesday show that consumers in the euro zone have reduced their spending in food, beverages and tobacco in May for the second month in a row amid soaring prices.

Investors are also waiting at 6:00 p.m. GMT for the minutes of the Fed’s June meeting, which could help to better understand the central bank’s intentions in terms of interest rates and its diagnosis on the health of the American economy. .

Political developments in the UK after a cascade of resignations by ministers and MPs are also of concern, as is the war in Ukraine and the COVID-19 outbreak in China.

WALL STREET VALUES TO FOLLOW

Uber Technologies and DoorDash respectively fell 2.8% and 6.5% in pre-market after the announcement of an agreement between Amazon and Grubhub, the American subsidiary of Just Eat Takeaway.com, specialist in meal delivery.

VALUES IN EUROPE

On the pan-European Stoxx 600, all major compartments are in the green, with basic resources (+2.88%), which had been strongly affected on Tuesday by fears of an imminent recession after the figures for business activity in Europe, posted one of the best performances in the sector.

The transport and leisure sector (+2.64%) and that of the media (+2.74%) are also in demand.

Airlines like Air France-KLM (+1.4227%) and Ryanair (+3.41%) benefit from announcements from Norway.

In business news, Just Eat Takeaway jumped 19.53% after the announcement of an agreement with Amazon and a stake in its subsidiary Grubhub.

On the downside, Faurecia dropped 5.61%, penalized by the lowering of Barclays’ recommendation to “underweight”, while Uniper fell again, still affected by a possible nationalization of the group, against a backdrop of lower supplies. in Russian gas.

RATE

Bond yields fell again on Wednesday the day after their sharp fall linked to the risk of a recession in the euro zone. The ten-year German Bund rate is at 1.178% and the two-year rate at 0.371%, down since the beginning of the month by about 15 basis points and 22 points respectively.

“We continue to see eurozone yields falling…It seems logical to us that the move is larger on the short end of the curve, in a context where recession fears are more pronounced than on the lower end of the curve. United States”, comments Antoine Bouvet, strategist at ING.

The yield of ten-year Treasuries, which fell in session to 2.78%, its lowest level since May 27, is displayed at 2.8199% and the two-year at 2.8446% after a low of one month at 2.729%.

CHANGES

In foreign exchange, the euro, which fell to a 20-year low against the dollar on Tuesday, continues to suffer from fears of recession and is trading on Wednesday almost at par with the greenback at 1.0188 dollars, which could cause a further rise. energy prices.

“It’s not just the threat of non-delivery (of gas) that weighs on the euro,” said Moritz Paysen, foreign exchange and rate adviser at Berenberg.

“The already high energy costs are a burden. Energy costs in Europe are much higher than in the United States,” he adds.

The dollar, for its part, advanced by 0.42% against the other major currencies, while the pound sterling fell to 1.1891 against the greenback, while the position of Prime Minister Boris Johnson is now greatly weakened.

OIL

The two main oil benchmarks, which fell 9.5% and 8.2% on Tuesday, rebounded slightly on Wednesday, but fears about demand and the health situation in China limited their rise.

The barrel of Brent took 1.4% to 104.21 dollars and that of American light crude (West Texas Intermediate, WTI) 0.67% to 100.17 dollars.

(Written by Claude Chendjou, edited by Sophie Louet)