Cautious opening in Europe on the horizon – 04/19/2022 at 09:16


SLIGHT DECLINE EXPECTED ON EUROPEAN STOCK MARKET

by Laetitia Volga

PARIS (Reuters) – Major European stock markets are expected to fall slightly on Tuesday as they open after the long Easter weekend in a climate of uncertainty surrounding the economy and ahead of new corporate results.

Futures contracts show a decline of 0.25% for the Paris CAC 40, 0.49% for the Dax in Frankfurt and 0.04% for the FTSE in London.

On Thursday, European markets ended after the European Central Bank’s meeting, which gave no new precise indications of monetary tightening.

But fears of slowing economic growth and prolonged inflation could prompt investors to trim risk appetite on Tuesday.

The World Bank cut its global growth forecast for this year by almost a percentage point to 3.2% from 4.1% given the expected impact of the Russian invasion of Ukraine.

“We expect a poor start in Europe after US markets’ decline on Monday, with concerns the World Bank’s forecast downgrade could be the first of many,” said Michael Hewson of CMC Markets.

The market is gearing up to release a set of results this week that will allow it to gauge the impact of the war in Ukraine and inflation on corporate accounts. In Europe, L’Oréal is due to report first-quarter sales after the close on Tuesday, and across the Atlantic, results from Netflix, Johnson & Johnson and IBM are particularly expected.

ON WALL STREET

US stocks ended slightly lower on Monday after a hesitant session as investors were torn between positive Bank of America results and rising bond yields.

The Dow Jones Index fell 0.11% to 34,411.69 points, the S&P 500 fell 0.02% to 4,391.69 points and the Nasdaq Composite fell 0.14% to 13,332.36 points.

Bank of America (+3.14%) reported a less sharp-than-expected fall in its quarterly profit, thanks in particular to strong consumer credit growth.

Twitter rose 7.6% after the group announced a “poison pill” to counter Elon Musk’s takeover bid and reported that private equity group Thoma Bravo is also considering a bid.

Chinese VTC giant Didi Global fell 18.5% after calling an extraordinary shareholders’ meeting to decide on the group’s delisting from US markets.

Futures point to a higher open on Tuesday.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei gained 0.69% but stayed just below the 27,000 mark. For traders, uncertainties over the upcoming earnings season, the depreciation of the yen and monetary policy in the United States limited gains.

In China, the CSI 300 fell 0.89%, while the Shanghai SSE index fell 0.3% on worries about the economy and the COVID-19 outbreak in the country.

The People’s Bank of China on Monday announced it would step up its financial support to companies and individuals affected by COVID-19, following a cut in the reserve requirement ratio for banks that markets deemed insufficient.

“We expect more help, mainly in the form of increased infrastructure investment, stronger credit growth and looser housing policies. But we don’t see the government doing ‘whatever it takes’ to meet the 5.5% growth target, nor changing hygiene measures in the immediate future,” said Wang Tao of UBS Investment Bank Research.

In Hong Kong, which shut down on Monday, the Hang Seng fell 2.33%, weighed down by the demise of big tech giants after China banned live streaming on unauthorized video game platforms.

Video-sharing site Bilibili fell 10.49%.

EVALUATION

The US 10-year Treasury yield fell to 2.851% after hitting 2.884% the previous day, its highest level since December 2018 on expectations of significant monetary tightening in the United States this year.

St. Louis Federal Reserve Chairman James Bullard reiterated Monday that he wants interest rates to rise to 3.5% by the end of the year in the face of inflation, implying a 50 basis point rate hike at the six remaining meetings of the US Federal Reserve Board Fed would require this year.

The 10-year German bund yield is slightly higher, to 0.867% in early trade.

On the foreign exchange market, the dollar gained 0.18% against a basket of reference currencies and the euro was almost stable at $1.0783.

OIL

Prices are moving sideways as Libya has had to halt some of its production due to social unrest and Shanghai prepares to partially lift its containment measures to allay demand concerns.

Brent rose 0.11% to $113.29 a barrel and US light oil (West Texas Intermediate, WTI) fell 0.1% to $108.1.

(edited by Nicolas Delame)

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