File photo of the offices of the London Stock Exchange Group
PARIS (Reuters) – Major euro zone stock markets are expected to fall on Monday, as is Wall Street, the economic and political environment continuing to discourage risk-taking as sterling continues to slide on the currency market. .
Index futures suggest a drop of 0.64% for the Paris CAC 40, 0.71% for the Frankfurt Dax and 0.6% for the EuroStoxx 50. In London, the FTSE 100, heavily weighted in large export-oriented stocks, could gain 0.64%.
The Parisian market lost 4.84% last week to close Friday at its lowest level since mid-July, and the European Stoxx 600 index, down 4.37% in five sessions, fell back to its lowest level. December 2020 after the multiple increases in key rates and the new signs of deterioration in the economic situation.
On the agenda for the week that begins there are many meetings that are likely to feed the nervousness of investors, between the forecasts of the OECD on Monday, numerous public interventions by the leaders of the central banks and a new series of indicators of the economies, from inflation in the euro zone to household spending in the United States.
Added to this are questions about Italy after the victory on Sunday of the right-wing coalition led by Giorgia Meloni, and especially the destabilization of the British pound.
Indeed, the British currency fell to its lowest level against the dollar, shedding as much as 5% to 1.0327 on weak trading in Asia, before paring its decline to 2.06% at 1.0639.
This uninterrupted drop feeds speculation about a possible intervention by the Bank of England (BoE), to try to counteract the impact on investor confidence of the massive tax cuts announced on Friday by the Government of Liz Truss, in which many investors see above all a danger. for British public finances.
“The BoE will have to take action today for sure, which will lead to a massive increase in interest rates to try to stabilize the British pound,” said Michael Every, a strategist at Rabobank in Singapore. “The market is now treating the UK like an emerging market.”
The euro hit a new 20-year low against the dollar at 0.9569, as Italian legislative outcomes raised recession fears. Now it is trading at 0.9649, 0.42% less.
The dollar index gained 0.54%.
ON WALL STREET
The futures of the main US indices suggest a downward opening of 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 recession and rate hikes, the Dow Jones closed down 1.62%, or 486.27 points, to 29,590.41, the S&P-500 lost 64.76 points, or 1 .72% to 3,693.23 and the Nasdaq Composite fell 198.88 points (-1.80%) to 10,867.93.
The week ended with a 4% drop for the Dow, 4.65% for the S&P 500 and 5.07% for the Nasdaq.
On the Tokyo Stock Exchange, the Nikkei index ended down 2.66%, its third consecutive drop, after a three-day weekend. It briefly broke support at 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 the press releases that mentioned the cessation of its production in Russia.
In China, the trend benefits from the announcement of an easing of health restrictions in Macau: if the Shanghai SSE Composite returns 0.55%, the broader CSI 300 gains 0.07%.
Bond yields continue to rise, both in Europe and in the United States: in the euro zone, the German ten-year bond takes almost six points in the first exchanges to 2.101% and the two-year five points to 1.967% .
The rise is comparable for Treasury bond yields at 3.7628% for ten-year notes 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.
The undisputed supremacy of the dollar in the foreign exchange market continues to penalize oil, already affected by the prospect of a fall in global demand.
Brent, at its lowest level in eight months, fell 1.33% to $85.00 a barrel and US light crude oil (West Texas Intermediate, WTI) fell 1.27% to $77.74.
(Written by Marc Angrand, with Tom Westbrook in Sydney, Editing by Kate Entringer)