US inflation shock isn’t done punishing equities – 09/14/2022 at 08:38


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PARIS (Reuters) – The main European stock markets are expected to fall on Wednesday after the worst closing on record on Wall Street since 2020, a result of stronger than expected inflation in the United States in August, which exacerbated fears of tightening monetary policies. .

The future of the index suggests a decrease of 0.96% for the CAC 40 in Paris, 0.67% for the Dax in Frankfurt, 0.93% for the FTSE 100 in London and 0.75% for the EuroStoxx 50.

All it takes is the announcement of a 0.1% increase in consumer prices (CPI) in the United States in August, when markets were expecting a fall of that much, to trigger a new movement of panic in most markets, without further indications. with a slowdown in inflation casting doubt on preferred scenarios for interest and growth.

A week before the decisions of the Federal Open Market Committee (FOMC) of the Federal Reserve, the assumption of a rate increase limited to 50 basis points has now been completely rejected and a 100-point climb, which is not even. mentioned on Monday, considered likely at 37% according to the FedWatch barometer, the scenario of 75 basis points remains preferred.

Nomura economists are among those who now favor the assumption of a 100 point increase in the “fed funds” rate next Wednesday.

“Markets have underestimated the anchor level that inflation has reached in the United States and the magnitude of the response needed from the Fed to challenge it,” they explained in a note.

Fixed income markets are currently pricing in a fed funds rate of 4.25% at the end of 2022 and a non-negligible possibility of a peak of 4.5% in early 2023, notes his part. Eugene Leow, senior rates strategist at Deutsche Bank.

However, such a scenario implies an increased risk of the US economy falling into recession, which is reflected in the more marked inversion of the US bond yield curve.

So investors will be keeping a close eye on the monthly US producer price figures due at 12:30 GMT. In Great Britain, inflation showed an unexpected slowdown in August to 9.9% for a year.

VALUES FOLLOWING:

ON WALL STREET

On the New York Stock Exchange, inflation numbers triggered a violent sell-off on Tuesday after four consecutive sessions of gains, ending with the largest decline recorded since June 2020.

The Dow Jones fell 3.94%, or 1,276.37 points, to 31,104.97, the Standard & Poor’s 500 lost 177.72 points, or 4.32%, to 3,932.69 and the Nasdaq Composite fell 632.84 points (-3.5.16%).

At the same time, the CBOE volatility index jumped more than 14%, the highest since July 12.

All major rating sectors ended in the red, with the most violent decline affecting telecommunications services (-5.63%), consumer discretionary (-5.22%) and high technologies (-5.35). %).

Within the Dow, Boeing and Intel fell nearly 7.2%, Apple 5.87% and Microsoft 5.5%.

Index futures suggest an open close to breakeven for now.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended at 2.78% after the American markets, a decline that mainly affected the major technology stocks such as SoftBank (-4.40%) or Tokyo Electron (- 3.69%).

In China, the Shanghai SSE Composite lost 0.86% and the CSI 300 1.21%.

RATE

US Treasuries yields strengthened in Asian trade after a surge in CPI numbers, along with a widening yield curve inversion, indicating rising recession fears.

The two-year, at 3.7566%, returned to its highest level since 2007 while the ten-year, at 3.4139%, returned to mid-June levels.

The gap between the two deadlines exceeded 34 basis points, against less than 22 points Monday night.

In Europe, the German ten-year, which jumped nearly eight basis points on Tuesday, fell slightly in early trade to 1.716%.

CHANGES

The dollar lost 0.04% against other major currencies, a small part of the remarkable rise recorded on Tuesday (+1.37%, the best daily performance since March 2020 and the start of the coronavirus crisis ).

Against the yen, the greenback rose in the session to 144.95, very close to the 24-year high recorded last week, before starting to fall again in reaction to reports from the Nikkei that the Bank of Japan started in preparations for possible interventions in the money market.

The euro was almost stable at $0.9971 after falling to 0.9954. But it traded near $1.02 on Tuesday ahead of the release of US inflation numbers.

wool

The prospect of another sharp US rate hike that could slow economic activity weighed on the oil market and overshadowed relative optimism in OPEC, which maintained its forecast for demand growth on Tuesday.

Brent fell 0.49% to 92.71 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.46% to 86.91 dollars.

MAIN ECONOMIC INDICATORS ON THE SEPTEMBER 14 AGENDA:

COUNTRY GMT INDICATOR PERIOD PRIOR CONSENSUS

EZ 09:00 Industrial production July -1.0% + 0.7%

– more than one year +0.4% +2.4%

USA 12:30 pm Producer prices August -0.1% -0.5%

– more than one year +8.8% +9.8%

THE MARKET SITUATION:

(Some data may show slight deviations)

ASIAN SCHOLARSHIPS

Indices Last Var. Var. %YTD

score

Nikkei-22 27818.6 -796.01 -2.78% -3.38%

5 2

Topix 1947.46 -39.11 -1.97% -2.25%

Hong Kong 18848.4 -478.43 -2.48% -19.44%

3

Taiwan 14658.3 -236.10 -1.59% -19.54%

1

Seoul 2411.90 -37.64 -1.54% -19.00%

Singapore 3254.69 -35.39 -1.08% +4.19%

Shanghai 3238.57 -25.23 -0.77% -11.02%

Sydney 6828.60 -181.10 -2.58% -8.27%

The Tokyo fence

: [.TFR]

WALLS

way

coral

former:

Indices Last Var. Var. %YTD

score

Dow Jones 31104.9 -1276.3 -3.94% -14.40%

7 7

S&P 500 3932.69 -177.72 -4.32% -17.49%

Nasdaq 11633.5 -632.84 -5.16% -25.64%

7

Nasdaq 12033.6 -706.10 -5.54% -26.26%

100 2

Wall session details

road: [.NFR]

“The Day Ahead” – Update on

next session on Wall Street

[DAY/US]

MARKETS

EUROPEANS

CAC 40 futures and the

the EuroStoxx50

The values ​​to follow

Paris and Europe:

[WATCH/LFR]

The session

former:

Closing Indices Var. Var. %YTD

score

Eurofirst 1662.44 -24.10 -1.43% -12.05%

300

Eurostoxx 3586.18 -60.33 -1.65% -16.57%

50

CAC 40 6,245.69 -87.90 -1.39% -12.68%

Dax 30 13,188.9 -213.32 -1.59% -16.97%

5

FTSE 7385.86 -87.17 -1.17% +0.02%

SMI 10891.5 -99.21 -0.90% -15.41%

4

CHANGES

Var. %YTD

Euro/Dlr 0.9975 0.9970 +0.05% -12.25%

DLR/Yen 143.74 144.55 -0.56% +24.93%

Euro/Yen 143.39 144.08 -0.48% +10.03%

DLR/CHF 0.9617 0.9613 +0.04% +5.43%

Euro/CHF 0.9593 0.9583 +0.10% -7.48%

Stg/Dlr 1.1495 1.1491 +0.03% -15.03%

Index $109.750 109.815 -0.06% +14.12%

0 0

RATE

Last Var. Spread/Bund

(points)

10-year Bund 1.7140 -0.0110

Bund 2 1.3960 +0.0130

year

OAT 10 2.2780 -0.0080 +56.40

year

10-year Treasury 3.4159 -0.0070

Treasury 2 years 3.7587 +0.0030

wool

(Current Leading Var Var.% YTD

dollars) nt

Gross 86.97 87.31 -0.34 -0.39% +42.08%

US light

Brent 92.76 93.17 -0.41 -0.44% +40.48%

(Written by Marc Angrand, with Kevin Buckland in Tokyo and Stella Qiu in Sydney)

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