Europe finishes higher, fresh post-Fed optimism
EUROPEAN STOCK MARKETS END AT
(Reuters) – European stocks ended higher on Friday as risk appetite was buoyed by better-than-expected corporate earnings in Europe and the United States and hopes of less aggressive monetary tightening by the Reserve Federal government despite recession fears.
In Paris, the CAC 40 increased by 1.72% to 6,448.5 points. The British Footsie took 1.06% and the German Dax 1.52%.
The EuroStoxx 50 Index gained 1.53%, the FTSEurofirst 300 1.2% and the Stoxx 600 1.28%.
After Thursday’s announcement that the US economy was contracting for a second consecutive quarter, investors continued to favor equities on hopes of a slower pace of monetary tightening by the US Federal Reserve.
Some analysts believe that despite this month-end in the green, investors should be wary of risky assets, like UBS Global Wealth Management’s Mark Haefele.
“In the near term, we believe the risk/reward trade-off for broad equity indices will be modest…the risk of a deeper collapse in economic activity is high,” the analyst said.
In the euro zone, inflation hit a new high in July, while the first estimate of second-quarter gross domestic product appeared to be 0.7% ahead of estimates. However, according to economists, this could be the last breath for the economy before it enters a recession later in the year.
The financial sector (+2.85%) and the gas and oil sector (+2.81%) recorded the strongest increases, while the pharmaceutical and healthcare sector index was the only European index to end with a minus (-0.43%) .
In terms of individual stocks, Aperam took nearly 9% yoy after releasing results, while Elior posted the best performance of the SBF 120 at +14.7% and continued to take gains after better-than-expected results released on Wednesday .
For its part, Vivendi shed 7.2% after the release of its results and the announcement that it was considering splitting Editis to avoid concentration problems related to the Lagardère acquisition.
ON WALL STREET
On Wall Street, growth stocks are helping US indices like Amazon and Apple, up 11.21% and 2.97% respectively, driven by their upbeat quarterly results.
At the close, Wall Street in Europe was slightly up, with the Dow Jones index up 0.27% to 32,618.11 points and the broader Standard & Poor’s 500 up 0.85%.
The Nasdaq Composite gained 1.03%.
THE INDICATORS OF THE DAY
Consumer spending in the United States rose a stronger-than-expected 1.1% in June versus 0.9% expected by economists, the Commerce Department said on Friday. Americans are paying more for goods and services with the highest monthly inflation since 2005.
On the currency side, the dollar fell 0.33% against a basket of reference currencies and the euro edged up slightly to $1.0207.
Bond yields in the euro zone rose sharply after news of a higher-than-expected inflation rate hit a record 8.9% yoy in July, putting pressure on the European Central Bank as it accelerated monetary tightening in September.
The German 10-year 10-year closed higher at around 0.8260%, while in the US market the 10-year Treasury yield rose almost five basis points to 2.6271%.
Brent is up 2.85% to $110.19 a barrel and West Texas Intermediate (WTI) is up 3.94% to $100.22.
(Written by Olivier Cherfan, edited by Jean-Michel Bélot)