Equities in the red ahead of central bank decisions – 09/19/2022 at 13:57


The screen in the trading room shows the Dow Jones Industrial Average of the New York Stock Exchange

by Claude Chendjou

PARIS (Reuters) – Wall Street is expected to open lower again on Monday and European stock markets are in the red mid-session, caution prevailing at the start of a marked week of decisions expected from several major centers, including the US Federal Reserve (Fed).

The future of the indexes in New York announced an opening on Wall Street below 0.75% for the Dow Jones, 0.86% for the Standard & Poor’s 500 and 0.96% for the Nasdaq.

In Paris, the CAC 40 fell 1.14% to 6,008.03 by 11:30 GMT. In Frankfurt, the Dax gave 0.54%. In London, markets are closed for Queen Elizabeth II’s funeral.

The pan-European FTSEurofirst 300 index fell by 0.64% and the EuroStoxx 50 for the euro zone by 0.88%. The Stoxx 600, which hit a two-month low in the session, contracted another 0.69% after the worst weekly performance in three months recorded by the European stock market on Friday.

“Investors seem to be worried about the upcoming central bank meetings,” said Patrick Armstrong, chief investment officer at Plurimi Wealth.

Monday’s drop in Europe, among other things, led by the new technology sector (-1.05%), sensitive to the evolution of interest rates, as the Fed begins a two-day that policy meeting on Tuesday.

An additional 75 basis point rate hike in the United States is widely expected and the probability of a 100 basis point increase is estimated at 20%, CME Group’s FedWatch barometer shows.

In the euro zone, the President of the European Central Bank (ECB), Christine Lagarde, is due to speak on Wednesday at an event organized by the Frankfurter Gesellschaft für Handel, Industrie und Wissenschaft.

Monetary policy releases from the Bank of Japan (BoJ), the Swiss National Bank (SNB) and the Bank of England (BoE) will follow on Thursday.

The new tightening expected from these central banks, apart from the BoJ, exacerbated investor jitters amid worsening economic conditions, with the US volatility Vix index nearing a two-month peak (27.83 points ), while its equivalent in Europe increased by 3.24% to 27.28 points.

The German Central Bank also indicated on Monday that the country’s economy may suffer all winter with possible gas rationing.

VALUES IN EUROPE

In the pan-European Stoxx 600, the main sectors are in the red and, in addition to the technology compartment, energy (-1.56%) posted one of the biggest drops after the drop in oil, which was punished on the strength of the dollar and fears of global demand.

TotalEnergies and Eni lost 2.11% and 1.19% respectively, while in “techs”, Capgemini fell 0.6% and SAP fell 1.24%.

In business news, TF1 and M6 fell by 2.41% and 2.36% after canceling their merger project.

Volkswagen, which is targeting Porsche at a valuation of 75 billion euros as part of its subsidiary’s IPO, gained 0.71%.

Deutsche Bank lost 0.63% after the announcement of the German bank to pay 60 million euros to the tax authorities, along with other groups, in the context of the “cum-ex” activity.

RATE

European bond yields continued to rise, supported by new statements from ECB officials, including Philip Lane, who said over the weekend that interest rate hikes could continue next year. Luis de Guindos, the institution’s vice-president, however, said on Monday that the next rate increase will depend on macroeconomic data.

The ten-year German Bund yield gained four basis points to 1.806% and the two-year yield rose 4.5 points to 1.594%.

In Italy, the ten-year BTP yield hit a three-month high of 4.107% (+7 points).

In the American market, the yield on ten-year Treasuries gained almost six points to 3.5061% and on two years seven points to 3.9294%.

CHANGES

The dollar advanced 0.1% against other major currencies, very close to the 20-year high reached on September 7.

The euro, down 0.28%, traded at 0.9987 dollars, again below parity with the greenback.

wool

Oil prices fell, as the strength of the dollar and fears of demand preceded an easing of health restrictions in China.

Brent fell 1.93% to 89.59 dollars a barrel and US light crude (West Texas Intermediate, WTI) 2.24% to 83.20 dollars.

(Writing by Claude Chendjou, editing by Kate Entringer)

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