EUROPE FINISHES IN THE RED, INTEREST RATES AND CHINA WEIGH
by Claude Chendjou
PARIS (Reuters) – European stock markets ended down on Monday and Wall Street was also trading in the red mid-session in a context of risk aversion linked in particular to expectations of rate hikes and fears of the impact of the health crisis in China.
In Paris, the CAC 40 ended down 2.75% at 6,086.02 points. The British Footsie dropped 2.32% and the German Dax 2.15%.
The EuroStoxx 50 index fell by 2.82%, the FTSEurofirst 300 by 2.75% and the Stoxx 600 by 2.9%.
Faced with soaring inflation, most traders expect a 75 basis point hike in US Federal Reserve rates in June after a half-point hike last week.
In the euro zone, money markets anticipate a rise of almost 95 basis points in the deposit rate of the European Central Bank (ECB) by the end of the year. In an interview published on Saturday, Robert Holzmann, a member of the ECB’s governing council, deemed two or three rate hikes appropriate this year.
Inflation data for the United States, China, Germany and France for April will be released on Wednesday.
The yield on ten-year US government bonds reached its highest since November 2018 at 3.2% on Monday, but fell slightly at the close of European stock markets.
“There is certainly bargain hunting,” said Tom di Galoma, managing director of Seaport Global Holdings, to explain this volatility.
The yield of the German Bund of the same maturity ended almost stable at 1.092% after having also reached a peak in session since August 2014 at 1.189%. The ten-year French OAT rate rose slightly to 1.633%.
On the economic level, the slowdown in China linked to the sanitary confinement, which could be prolonged according to sources, was confirmed with the deceleration of the growth of exports to their slowest pace since June 2020 (+3.9% on a year) and the stagnation of imports.
The Sentix index of investor sentiment in the euro zone, for its part, fell to its lowest since June 2020, at -22.6 in May, falling for the third consecutive month as the impact of the crisis in Ukraine on the economy is felt.
“Fears of slowing growth, more restrictive (hawkish) central banks, rising real yields and political uncertainties will persist in the near term, putting further pressure on equities and downward revisions on stocks. earnings,” notes Michele Morganti, equity strategist at Generali Investments.
The volatility index, a closely followed barometer of investor nervousness, is up 16% in the United States VIX and its European equivalent ended with a gain of 8.9%, both above 35 points.
VALUES IN EUROPE
In Europe, no major Stoxx 600 compartment escaped the decline in equity markets, basic resources (-3.2%), energy (-4.6%) and new technologies (-3 .5%) showing one of the largest declines against a backdrop of falling iron ore prices, fears over Chinese demand and rising bond yields.
In the “techs”, Atos, Capgemini, SAP and Worldline fell from 1% to 4.7%. Infineon, down 6%, suffered from annual forecasts deemed unsurprising.
In commodities, ArcelorMittal, Rio Tinto, Glencore and Anglo American lost 1% to 5.9%.
Luxury groups, very dependent on China, have also been neglected, like Kering (-3.3%), LVMH (-3.4%) or Richemont (-4%).
AT WALL STREET
At the time of the close in Europe, the Dow Jones fell 1.5%, the Standard & Poor’s 500 2.4% and the Nasdaq 3.2%.
In values, the digital giants are suffering: Microsoft, Amazon, Apple, Alphabet, Meta Platforms and Tesla drop from 1.7% to 6.3% and their index loses 3.2%.
Side business results, the cosmetics manufacturer Coty fell 6.2% despite the increase in its annual profit forecast.
The dollar appreciated by 0.20% against a basket of international currencies, benefiting both from the rise in US bond yields and from its status as a safe haven asset in fear of an economic slowdown in China. The index measuring the fluctuations of the greenback touched on Monday a peak since July 2002 after having gained nearly 9% since the beginning of the year.
The euro, down 0.09%, is trading at 1.0541 dollars.
The British pound, for its part, hit its lowest level in almost two years against the dollar, at 1.2258.
In cryptocurrencies, bitcoin fell to a low since July 2021 at $32,763.
Oil prices are hurt by both the strength of the dollar and worries about Chinese demand, with authorities in Shanghai likely to maintain health restrictions until the end of the month amid fears of a rebound in infections from the virus. coronavirus, multiple sources reported.
The barrel of Brent fell 5.35% to 106.41 dollars a barrel and that of American light crude (West Texas Intermediate, WTI) by 5.63% to 103.58 dollars.
(Report Claude Chendjou, edited by)