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Relief over China outweighs inflation concern

Relief over China outweighs inflation concern
Written by madishthestylebar

EUROPEAN SCHOLARSHIPS ARE PROGRESSING

PARIS (Reuters) – Wall Street is expected to rise sharply and European stocks rose sharply mid-session on Tuesday as the dollar retreats and investors turn away from government bonds, the latest news from China favoring a recovery appetite for risky assets even if they do not obscure the risks associated with inflation and interest rates.

Futures contracts on the main New York indices point to an increase of 1.47% for the Dow Jones, 1.55% for the Standard & Poor’s 500 and 1.88% for the Nasdaq.

In Paris, the CAC 40 gained 1.41% to 6,437.11 points around 11:00 GMT, the highest since May 5. In London, the FTSE 100 takes 0.94% and in Frankfurt, the Dax advances by 1.53%.

The EuroStoxx 50 index is up 1.59%, the FTSEurofirst 300 1.48% and the Stoxx 600 1.48%.

Shanghai authorities have lifted some of the strict health restrictions applied in recent weeks in an attempt to stem the resurgence of the COVID-19 outbreak, after three consecutive days with no new cases outside quarantine areas.

At the same time, according to several sources, Chinese Vice-Premier Liu He was to meet during the day with leaders of the high-tech sector, information which maintains the hope of a reduction in regulatory pressure on the sector.

The CSI 300 index of Chinese large caps ended the session on an increase of 1.25% and in Hong Kong, the index of “techs” jumped 5.78%.

In Europe, the employment figures in France and the United Kingdom and the slightly upward revision of growth in the euro zone in the first quarter were generally well received.

But if optimism prevails, concerns about growth and inflation remain very present, especially as the economic indicators published Monday in China as in the United States fueled fears of a sharp slowdown in the activity.

Markets will therefore be watching US retail sales and industrial production figures ahead of the opening on Wall Street, as well as public interventions by several Federal Reserve officials, including its chairman, Jerome Powell, from 18:00 GMT. .

VALUES IN EUROPE

All the major sectors of the European rating are evolving in the green at midday, the biggest increases being for the compartment of raw materials, whose Stoxx index gains 3% and that of high technologies (+ 2.80%) .

In Paris, Engie takes 5.97% at the head of the CAC 40 after raising its annual results targets and announcing an agreement with the Russian giant Gazprom on the payment of its gas purchases.

Daimler Truck (+7.21%) and Caixabank (+3.79%) also benefit from results hailed by analysts.

Lagging the market, Vodafone (-0.13%) is neglected, its forecast for the financial year 2023 being below consensus.

RATE

The return of investors to equities disadvantages government bonds, resulting in a rise in yields: that of ten-year US Treasury bonds takes four basis points to 2.924% and the two-year plus six points to 2, 6319%.

In the euro zone, this movement, already marked since the start of the session, intensified after the declarations of Klaas Knot, the governor of the central bank of the Netherlands, who judges that a rate increase of a quarter point in July is “realistic” but does not rule out an increase of half a point.

The yield of the ten-year German Bund thus takes more than eight points to 1.021%.

Money market futures now price in a total 105 basis point hike in European Central Bank (ECB) rates by the end of the year.

CHANGES

Klaas Knot’s remarks also benefit the euro, which appreciated by 0.81% against the dollar at 1.0515 and returned to its level of last Wednesday.

On the contrary, the greenback continues, against the other major currencies, the decline that began on Friday after its 20-year highs: the index which makes it possible to follow its fluctuations against a reference basket gives up 0.62%, more than 1, 4% below its Friday peak.

OIL

The price of crude reached its highest level in seven weeks, still buoyed by the prospect of an embargo by the European Union on Russian oil despite persistent opposition from Hungary and by the hope of a resumption of Chinese demand.

Brent crude rose 0.77% to $115.12 a barrel after hitting 115.53, its highest level since March 28, and US light crude (West Texas Intermediate, WTI) 0.71% to 115.01 dollars after a peak at 115.43.

(Written by Marc Angrand)

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