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by Claude Chendjou
PARIS (Reuters) – Wall Street is expected to fall at the opening on Tuesday and European stocks are also in the red at mid-session, at the start of the first day of the monetary policy meeting of the United States Federal Reserve which should lead to a sharp rise in interest rates on Wednesday at the risk of an acceleration in the deterioration of the economic situation.
Futures on New York indices signal an opening on Wall Street down 0.40% for the Dow Jones, 0.47% for the Standard & Poor’s 500 and 0.57% for the Nasdaq.
In Paris, the CAC 40 dropped 0.95% to 6,003.92 around 10:15 GMT. In Frankfurt, the Dax yielded 0.83% and in London, closed Monday due to the funeral of Queen Elizabeth II, the FTSE fell 0.19%.
The pan-European FTSEurofirst 300 index fell by 0.55%, the EuroStoxx 50 of the euro zone by 0.74% and the Stoxx 600 by 0.73%.
Faced with the persistence of high inflation, which reached 8.3% over one year in August in the United States, the decisions on Wednesday of the Fed’s Federal Open Market Committee (FOMC), which meets on Tuesday, are very expected by investors.
The markets are mainly counting on a rise in rates of 75 basis points, but a rise of 100 points is not excluded.
Sweden’s central bank surprised on Tuesday by announcing a 100-point rise in its key interest rate to 1.75% and warned that it plans to continue tightening its monetary policy to fight inflation.
The monetary policy decisions of the Bank of England (BoE), the Bank of Japan (BoJ) and the Swiss National Bank (SNB) will be known on Thursday. Switzerland also significantly reduced its growth forecasts on Tuesday, to 2% for this year and 1.1% for 2023.
In the euro zone, where the European Central Bank (ECB) raised its rates by 75 points at the beginning of the month, its president, Christine Lagarde, must speak in the evening during a debate in Germany.
“It’s all about central banks this week,” says Erik-Jan van Harn, macroeconomic strategist at RaboResearch.
In the meantime, official statistics published on Tuesday show that producer prices in Germany recorded an unprecedented rise in August over one year and one month, by 45.8% and 7.9% respectively.
VALUES IN EUROPE
The banking compartment (+0.55%), supported by expectations of rising interest rates, posted the strongest rise on the Stoxx 600, while, on the other hand, real estate (-3.84%) , which should suffer from the increase in the cost of credit, shows the sharpest drop.
Unibail-Rodamco and Klépierre lost 1.74% and 1.38% respectively, while Commerzbank advanced by 1.84%.
Luxury stocks like Kering (+0.57%) or Richemont (+0.69%) are also in demand, taking advantage of the project to further ease health restrictions in China.
In terms of business results, the British DIY store group Kingfisher (-3.31%) was penalized by the fall of nearly 30% in its half-year profit, while the German Henkel, up 0.83% , benefited from the increase in its organic growth forecast for this year.
Bond yields in Europe continue to rise, driven in particular by producer price figures in Germany.
That of the ten-year German Bund reached a three-month high of 1.89%, the five-year a peak since July 2011 at 1.8% and the two-year, the most sensitive to changes in rates, a peak since July 2011 at 1.69%.
Expectations on the evolution of the cost of credit show an interbank rate in the euro zone at 2.7% in August 2023.
In the United States, the yield on ten-year Treasuries rose nearly five points to 3.54% and that of two years by around three points to 3.97%.
The dollar (+0.13%) remains close to its 20-year peak against other major currencies, recorded on September 7.
The euro, down 0.16% to $1.0006, is holding just above parity with the greenback.
The Swedish krona briefly benefited in the morning from the country’s central bank’s surprise rate hike to trade at 10.7025 to the euro and 10.764 to the dollar before subsequently losing all of its gains.
Oil prices are supported by supply tensions, an OPEC+ document shows that the organization’s production was below the planned target of 3.583 million barrels per day (bpd) in August.
Investors are also awaiting the Fed’s decisions to try to assess their consequences on global demand for crude oil in the months to come.
Brent nibbles 0.01% to 91.99 dollars a barrel and American light crude (West Texas Intermediate, WTI) takes 0.27% to 85.50 dollars.
(Written by Claude Chendjou, edited by Kate Entringer)
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