Nervousness should dominate before an extremely busy week
BEFORE AN EXTREMELY BUSY WEEK, NERVOUSNESS SHOULD OVERCOME
by Laetitia Volga
PARIS (Reuters) – Major European stock markets are expected to fall at Monday’s open, as recession fears should again prevail ahead of key economic and monetary policy dates in the coming days, beginning with the US Federal Reserve Board meeting (Fed).
Futures contracts are pointing to a decline of 0.48% for the Paris CAC 40, 0.72% for the Dax in Frankfurt, 0.36% for the FTSE in London and 0.64% for the EuroStoxx 50.
The Fed concludes its two-day meeting on Wednesday and markets are broadly expecting another 75 basis point rate hike with only about a 9% chance of a 1 percentage point hike.
“There is additional downside risk for risky assets as recession fears mount and central banks remain determined to fight inflation at the expense of growth,” Standard Chartered strategists said in a statement.
The week is also powered by the first figures for US second-quarter GDP, which is set to rise 0.4%, according to the Reuters consensus, after a 1.6% decline in the January-March period. Meanwhile, investors will be watching the Ifo business climate index in Germany at 08:00 GMT.
The week will be the busiest in terms of corporate earnings and observers will be watching closely for the impact of the strong dollar on America’s big corporations. Among the expected releases, those from Meta, Alphabet, Apple or even Pfizer and Boeing will be very popular.
In Europe, Volkswagen, Nestlé, Deutsche Bank as well as Airbus, TotalEnergies, LVMH and BNP Paribas are expected in Paris.
ON WALL STREET
The New York Stock Exchange closed lower on Friday as disappointing results from Snap weighed on other social media and tech companies.
The Dow Jones index fell 0.43% to 31,899.29 points, the broader S&P 500 lost 0.93% to 3,961.63 points and the Nasdaq Composite fell 1.87% to 11,834.11 points.
Snap, owner of the Snapchat app, fell nearly 40% to $9.96, its lowest since March 2020, after the company posted its weakest quarterly revenue growth since its IPO.
Other companies that rely heavily on advertising, like tech giants Meta Platforms and Alphabet, fell 7.6% and 5.6%, respectively.
Among the 11 major sectors in the S&P 500, communications services (-4.3%) and technology (-1.4%) suffered the largest declines.
Futures signal a drop of about 0.2% at the open.
After seven consecutive trading sessions, the Nikkei on the Tokyo Stock Exchange fell 0.77%, penalized by tech heavyweights in Wall Street’s wake.
Concerns over COVID-19 and the ailing real estate sector weighed on Chinese markets, with the Shanghai Stock Exchange composite index falling 0.57% and the large-cap Mainland China CSI 300 index falling 0.6%.
The dollar is steady against other majors (-0.02%) and the euro is trading at $1.0196
On the bond side, the US 10-year bond edged up to 2.7977%.
It fell to a two-month low of 2.732% in Friday’s session, according to preliminary S&P survey results, after the composite PMI and services indices fell for the first time since June 2020.
In early trade, the German 10-year Bund yield rebounded about 4.5 basis points to 1.065% after falling on Friday on recession fears fueled by lower-than-expected European PMI indices.
Oil is bearish on concerns that a further rise in US interest rates could limit demand for crude.
Brent fell 0.59% to $102.59 a barrel and US light oil (West Texas Intermediate, WTI) 0.78% to $93.96.
(edited by Kate Entringer)