Start of rebound in sight in Europe but feverishness persists (updated)

PARIS (Reuters) – Major eurozone stock markets are expected to rise on Tuesday, with Wall Street appearing to be heading for a rebound from sharp declines the previous day, but the market backdrop remains dominated by the twin threat of higher rates interest and slowing economic growth.

Futures contracts on indices suggest an increase of 0.87% for the CAC 40 in Paris, 1.08% for the Dax in Frankfurt, 0.26% for the FTSE 100 in London and 1.03% for the EuroStoxx 50.

On Wall Street, the flagship Standard & Poor’s 500 index ended Monday below 4,000 points for the first time since March 2021 and in Asia, the MSCI index of Asia-Pacific markets excluding Japan is moving into the red for the seventh session. in a row, the lowest since July 2020.

The rate hikes decided last week in Australia, the United States and the United Kingdom, among others, are far from having allayed fears linked to inflation and, on the other hand, are fueling those of a contraction in activity and a deterioration in the earnings outlook for listed companies.

The health situation in China, which is disrupting supply chains and raising fears of a marked drop in demand, is also weighing on the trend.

“Yesterday saw bond yields and equities fall sharply in unison, a move that may be driven by fears that the global economy is heading for a sharp downturn, stagflation or even recession,” he said. CMC Markets analyst Michael Hewson. “Price action shows that markets are more concerned about these scenarios than rising rates.”

IN WALL STREET

The New York Stock Exchange ended sharply lower Monday on concerns about inflation and tightening central bank policy.

The Dow Jones index fell 1.99%, or 653.67 points, to 32,245.7 points.

The broader S&P-500 fell 132.08 points, or 3.20%, to 3,991.26, ending below 4,000 points for the first time since March 31, 2021.

The Nasdaq Composite fell 521.41 points (-4.29%) to 11,623.25 points, its lowest closing level since November 2020.

The drop in the equity markets affected all sectors, but the most marked decline affected the energy sector (-8.3%) with the drop in oil prices. Apple lost 3.08%, the main contributor to the decline in the Nasdaq and the S&P 500.

Index futures so far suggest a rebound of around 0.5% for the Dow, 0.8% for the S&P and 1.3% for the Nasdaq.

IN ASIA

At the Tokyo Stock Exchange, the Nikkei index ended down 0.58%. Its decline, led by technology stocks, brought it back in session to 25,773.83 points, its lowest level since mid-March.

Sony, which was due to report results after the close, fell 3.14%.

In China, the SSE Composite gained 0.82% and the CSI 300 0.85% the day after the promises of new economic support measures made by the central bank, but in Hong Kong, the Hang Seng index fell by 2 .12% after a three-day weekend, penalized by the fall of several large caps such as Alibaba (-4.76%) or Tencent (-2.23%).

EXCHANGES/RATES

The dollar lost some ground against other major currencies (-0.03%) but remained close to the new 20-year high reached in session on Monday.

The euro thus rose to 1.0571 against less than 1.05 at its lowest the previous day.

In the bond market, the yield on ten-year US Treasury bills, at 3.0578%, is moving very close to its closing level on Monday. It had risen in session to 3.203%, its highest level since November 2018.

The Treasury is to issue 45 billion three-year securities on Tuesday, 36 billion ten-year securities on Wednesday and 22 billion 30-year securities on Thursday.

In Europe, benchmark yields are up slightly in early trade, at 1.103% for the ten-year German Bund.

OIL

The oil market, which experienced its worst day since March on Monday, continues to retreat on concerns about global demand, fueled by prolonged confinements in China and monetary tightening in Western countries. Its decline is further amplified by the strength of the dollar.

Brent fell 1.25% to 104.62 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.19% to 101.86 dollars. They lost 5.74% and 6.09% respectively on Monday.

(Written by Marc Angrand)