SHARES RISE, GEOPOLITICAL RISKS REFRESHED
by Laetitia Volga
PARIS (Reuters) – With Wall Street expected to rise and European stocks up modestly during Wednesday’s trading session, the risk of an escalation between the United States and China appears contained for now, while bond yields have been in reaction to the determination shown rise by members of the Federal Reserve to curb inflation.
Futures signals a 0.36% gain for the Dow Jones and 0.44% for the Standard & Poor’s 500 and Nasdaq.
In Paris, the CAC 40 was up 0.38% to 6,434.38 as of 11:50 GMT. In Frankfurt the Dax gained 0.21% and in London the FTSE gained 0.1%.
The pan-European FTSEurofirst 300 index rose 0.13%, the Eurozone EuroStoxx 50 rose 0.51% and the Stoxx 600 rose 0.25%.
US House Speaker Nancy Pelosi left Taiwan after a brief visit during which she expressed US support and solidarity for Taiwanese democracy, angering Beijing.
Although China has ordered military maneuvers around Taiwan, investors expect Beijing’s response to remain purely ostentatious and support the global stock rally.
“Nancy Pelosi’s visit did not provoke a truly aggressive response from the Chinese authorities,” said AFS analyst Arne Petimezas.
This relative relief from observers seems to prevail at the moment given the morning’s macroeconomic disappointments, fears of a possible global recession and statements by several Fed regional office governors determined to fight inflation.
“Most equity indices remain strong so far in August and investors continue to cheer on a positive earnings season in which companies have shown resilience in an uncertain economic environment,” said ActivTrades’ Pierre Veyret.
“However, bullish drivers are few and far between, particularly in the medium to long term, and investors likely need more clarity on where economies are headed before they propel stock prices to new highs,” the analyst added.
VALUES IN EUROPE
At the top of the CAC 40, Axa is up 5.84% after reporting first-half net income up 3%, and Societe Generale is up 3.05% after reporting a smaller-than-expected loss in the second quarter.
Veolia is down 2.84% according to its results.
In Frankfurt, Commerzbank is up 1.84% but BMW is down 5.92% according to its results, while Infineon is up 2.46% after releasing better-than-expected quarterly results and raising its revenue outlook.
Tod’s rose 20.29% after the founding family and majority shareholder announced it would make a public takeover bid for a portion of the shares it does not already own in a bid to take the luxury conglomerate off the market.
Benchmark Treasury bond yields rose after hawkish comments from Fed officials who envisaged further significant rate hikes by the institution in a bid to curb inflation.
The 10-year-old American gains four basis points to 2.7829% and its German equivalent climbs nine points to 0.876%.
“It’s clear that Fed officials believe market participants have gone too far in lowering their rate hike expectations,” MUFG analysts said. “The Fed’s ‘hawkish’ comments had an immediate impact.”
In the forex market, the dollar is virtually stable against a basket of reference currencies.
The euro is trading at $1.018, up 0.16%, despite the contraction in PMI indices and the drop in euro-zone retail sales.
Oil prices are rising ahead of OPEC+ announcements after a meeting where producing countries are expected to discuss a modest increase in supply by about 100,000 barrels a month, according to a Reuters document, while the United States hopes for a larger increase.
Brent rose 0.43% to $100.97 a barrel and US light oil (West Texas Intermediate, WTI) rose 0.56% to $94.95.
(Written by Laetitia Volga, Editing by Kate Entringer)