Rise in sight in Europe after a rate cut in China – 05/20/2022 at 07:41

Rise in sight in Europe after a rate cut in China - 05/20/2022 at 07:41


RISE IN VIEW IN EUROPE AFTER A RATE DROP IN CHINA

PARIS (Reuters) – The main European stock markets are expected to rise sharply on Friday in the wake of the major Asian markets after the announcement by the People’s Bank of China (PBC) of a marked drop in one of its main key rates, a new stimulus for the world’s second largest economy.

Futures contracts on indices suggest an increase of 1.14% for the Dax in Frankfurt, 1.29% for the FTSE 100 in London and 1.13% for the EuroStoxx 50. As for the CAC 40 in Paris, it could take around 1% according to the first indications available.

The BPC lowered by 15 basis points, to 4.45%, its prime five-year loan rate, which serves as a benchmark for the Chinese mortgage market. It is its biggest cut since the overhaul of the central bank’s interest rate system in 2019, when economists expected a cut of just five to ten points.

“While this will certainly not be enough to counter all the headwinds that are holding back growth in the second quarter, it is a step in the right direction and the markets are reacting by anticipating perhaps further easing to come,” comments Carlos Casanova. , UBP’s senior Asia economist in Hong Kong.

The news so far takes precedence over concerns over global inflation, tighter monetary policies in both the US and Europe and the risk of recession in the US that have dominated market sentiment in recent days. .

The CAC 40 lost 1.41% over the first four sessions of the week and the broad European Stoxx 600 index 1.27%. Above all, the American Standard & Poor’s 500 fell 3.06% and is heading for its seventh consecutive week of decline. It is down 18% from its January 3 closing record.

AT WALL STREET

The New York Stock Exchange ended lower on Thursday but above its daily lows after a rollercoaster session marked by the fall of Cisco Systems after the downgrade of its forecast, which added to concerns linked to inflation and rising interest rates.

The Dow Jones index fell 0.75% to 31,253.13 points, the Standard & Poor’s lost 0.58% to 3,900.79 and the Nasdaq Composite fell 0.26% to 11,388.50.

Cisco plunged 13.7% after lowering its forecast for full-year revenue growth, which it explains by the impact of its exit from Russia and the shortage of components due to containment measures against the COVID-19. 19 in China.

After the close, the equipment specialist for the semiconductor sector Applied Materials yielded 1.7%, its forecast for the current quarter being lower than Wall Street expectations.

Index futures so far suggest a rebound of 0.6% for the Dow and 1.1% for the Nasdaq.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index gained 1.3% less than an hour before closing and thus erased around half of its losses from the previous day, benefiting from cheap purchases by investors who bet on the improvement in corporate results, thanks in part to exchange rate effects.

In China, the Shanghai SSE Composite rose 1.19% and the CSI 300 1.46% after the decision of the People’s Bank of China, which also supports the Hang Seng in Hong Kong (+2.06%).

CHANGES

The dollar is up against the other major currencies (+0.19%) but this rebound should not prevent it from recording its first negative weekly performance since the beginning of April since it is currently down by one just over 1.5% over the week, after a 10% jump since mid-January.

The euro, for its part, fell to 1.0579 dollars, down 0.07% but heading for an increase of around 1.5% over the week.

RATE

The yield on ten-year US Treasuries fell in Asian trading to 2.8424% but the two-year rose slightly to 2.6265%,

They had both fallen on Thursday, fears of a rapid deterioration in the economic situation in the United States having called into question in the eyes of some investors the scenario of accelerated tightening of monetary policy by the Federal Reserve.

The ten-year had thus returned to 2.772%, the lowest since the end of April, 43 basis points below its peak of last week.

OIL

The risk of a marked slowdown in global growth which would curb oil demand weighs on the price of a barrel: Brent drops 0.75% to 111.20 dollars a barrel and American light crude (West Texas Intermediate, WTI) 1 .21% to $110.85.

(Written by Marc Angrand, with Andrew Galbraith in Shanghai)

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