Stocks in sight to fall while waiting for US inflation – 04/12/2022 at 10:10 am


FALL OF THE MAIN EUROPEAN STOCK EXCHANGE EXPECTED

by Laetitia Volga

PARIS (Reuters) – Major European stock markets are expected to fall at the open on Tuesday and government bond yields are expected to rise further on fears of runaway inflation leading to further monetary tightening in the United States could.

Futures contracts show a decline of 1.4% for the Paris CAC 40, 1.41% for the Dax in Frankfurt, 0.53% for the FTSE in London and 1.36% for the EuroStoxx 50.

The inflation theme is material as the release of monthly consumer price data in the United States draws closer (12:30 GMT), further acceleration of which could confirm the Federal Reserve in a more than expected monetary tightening scenario.

Reuters consensus expects consumer prices in the United States to rise 8.4% yoy in March, marking the index’s largest rise since January 1982.

“We’re quite hawkish on US interest rate hikes and we believe it’s not just the size of monetary tightening but also the pace that will affect investors,” Elizabeth Tian, ​​head of bond management at , told Reuters of Citigroup in Sydney.

“Equities markets have been very strong…but we expect the May Fed meeting to lead to an announcement of a tapering of monetary easing and then we could see volatility build in equities,” she added.

In Germany, inflation harmonized with European standards (HICP) reached 7.6% yoy in March, the highest level in more than 40 years, according to final figures from Destatis.

ON WALL STREET

The New York Stock Exchange closed lower on Monday as the continued rise in bond yields weighed on big growth stocks.

The Dow Jones index fell 1.19% to 34,308.08 points, the S&P 500 fell 1.68% to 4,412.83 points and the Nasdaq Composite fell 2.18% to 13,411.96 points.

Futures are currently pointing to a 0.25% to 0.4% drop at the open.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei fell 1.81% to a 4-week low as technology stocks, heavyweights in the index, fell on Wall Street’s negative session.

Resona Asset Management’s chief strategist Koichi Kurose pointed out that concerns about China’s COVID-19 lockdown and rising commodity prices were also affecting the trend.

In China, the large-cap CSI 300 index (+1.53%) and the Shanghai SSE index (+1.2%) rose, a move analysts attribute to the easing of video game regulations.

EVALUATION

In the bond market, the US 10-year Treasury yield rose more than four basis points to 2.8224% after hitting its highest level since December 2018 at 2.8360%.

Its German equivalent rose almost three basis points on the first exchanges to 0.833%, its highest level since July 2015. The same can be said for 10-year French bonds, which climbed to 1.348%.

CHANGES

Fluctuations are limited in the forex market, where the dollar gained 0.22% against a basket of reference currencies for its ninth session of consecutive hikes on expectations of a Fed rate hike.

The euro eased slightly to $1.0863 after being supported by the results of the first round of French presidential elections the previous day.

OIL

Oil prices rose, reversing some of the previous day’s losses as the market weighed the possibility of sanctions on Russia’s energy sector and OPEC warned it would be unable to recoup the loss in Russian crude.

Brent rose 2.97% to $101.4 a barrel and American light oil (West Texas Intermediate, WTI) rose 3.13% to $97.24.

On Monday both lost around 4% on demand fears over the health crisis in China.

(Laetitia Volga, edited by Bertrand Boucey and Jean-Michel Bélot)

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