No rest for equities, all-time low for pound – 09/26/2022 at 08:47


File photo of the offices of the London Stock Exchange Group

PARIS (Reuters) – Major stock markets in the euro zone are expected to fall on Monday, as is Wall Street, the economic and political environment continuing to discourage risk-taking as the pound sterling continues to fall on foreign exchange. market.

Index futures suggest a drop of 0.64% for the CAC 40 in Paris, 0.71% for the Dax in Frankfurt and 0.6% for the EuroStoxx 50. In London, the FTSE 100 is heavily weighted in export-oriented large stocks, may gain 0.64%.

The Paris market lost 4.84% last week to end Friday at its lowest level since mid-July, and the European Stoxx 600 index, down 4.37% in five sessions, fell back to levels of this in December 2020 after several key rate increases and the new signs of deteriorating economic conditions.

On the agenda for the week that started are several meetings that are likely to arouse the nervousness of investors, between the forecasts of the OECD on Monday, several public interventions by the leaders of the central bank and a new series of the indicators. economy, from inflation in the euro zone to household spending in the United States.

This adds to the questions about Italy after the victory on Sunday of the right-wing coalition led by Giorgia Meloni, and especially the destabilization of the pound sterling.

CHANGES

The British currency actually fell to its lowest level against the dollar, yielding up to 5%, to 1.0327, in weak Asian exchanges, before reducing its decline by 2.06%, to 1.0639 .

This relentless fall has fueled speculation about a possible intervention by the Bank of England (BoE), to try to counter the impact on investor confidence of the big tax cuts announced on Friday by the government of Liz Truss, where many investors see above all a risk. for British public finances.

“The BoE needs to act now for sure, which will lead to a big increase in interest rates to try to strengthen sterling,” said Michael Every, strategist at Rabobank in Singapore. “The market is now treating the UK as if it were an emerging market.”

The euro hit a new 20-year low against the greenback at 0.9569, as Italian legislative results increased fears of a recession. It is currently trading at 0.9649, down 0.42%.

The dollar index gained 0.54%.

ON WALL STREET

The future of major US indices suggested opening 0.68% for the Dow Jones, 0.9% for the Standard & Poor’s 500 and 0.96% for the Nasdaq.

On Friday, amid fears of a recession and rising rates, the Dow Jones ended up 1.62%, or 486.27 points, at 29,590.41, the S&P-500 lost 64.76 points, or 1, 72%, in 3,693.23 and the Nasdaq Composite fell 19.8 points. -1.80%) to 10,867.93.

The week ended with a drop of 4% for the Dow, 4.65% for the S&P 500 and 5.07% for the Nasdaq.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended at 2.66%, the third consecutive decline, after a three-day week. He briefly broke the support of 26,500 points in the session for the first time since July 14.

The session was marked among other things by the fall of Mazda (-5.56%) after press reports that mentioned the cessation of its production in Russia.

In China, the trend benefited from the announcement of the easing of health restrictions in Macao: if the SSE Composite in Shanghai gained 0.55%, the broader CSI 300 gained 0.07%.

RATE

Bond yields continue to rise, in Europe as in the United States: in the euro zone, the ten-year German takes almost six points in the first exchanges to 2.101% and the two-year five points to at 1.967%.

The increase was comparable to Treasury bond yields, at 3.7628% for ten-year securities and 4.2974% for two-year bonds, the highest in 15 years.

The yield spread between Germany and Italy is currently almost stable at 229 basis points.

wool

The undisputed supremacy of the dollar in the foreign exchange market continues to punish oil, which has been crippled by the prospect of a decline in world demand.

Brent, at its lowest in eight months, fell 1.33% to 85.00 dollars a barrel and American light crude (West Texas Intermediate, WTI) 1.27% to 77.74 dollars.

(Writing by Marc Angrand, with Tom Westbrook in Sydney, editing by Kate Entringer)

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