WALL STREET EXPECTS CAUTIOUS UPWARDS AHEAD OF US INFLATION
by Laetitia Volga
PARIS (Reuters) – Wall Street is expected to recover slightly at the open, and European stock markets are flat for mid-session on Wednesday ahead of the release of the inflation figure in the United States, a key one Theme for developments in short-term financial markets and US Federal Reserve monetary policy.
Futures contracts signaled gains of 0.23% for the Dow Jones and Standard & Poor’s 500 and 0.26% for the Nasdaq on the day after a session in the red marked by the wait-and-see attitude and decline in the technology sector disappointing forecasts from Micron
In Paris, the CAC 40 is stable (-0.01%) at 6,489.1 at 10:38 GMT. In Frankfurt, the Dax rose by 0.22% and in London the FTSE by 0.08%.
The pan-European index FTSEurofirst 300, Eurozone EuroStoxx 50 and Stoxx 600 are up 0.03%.
Risk appetite is even more limited in August with the forthcoming July CPI release at 12:30 GMT in the United States, which could revive or dampen expectations of the Fed’s next big rate hike in the month.
According to Reuters consensus, the CPI index is expected to rise 0.2% on a month-to-month basis and 8.7% on a yearly basis, which would represent a slowdown from the previous month, but the base index, which excludes energy and food , could accelerate to 6.1% over a year.
“Even if inflation eases slightly, the Fed will look to push ahead with a 75 basis point hike next month on confidence the job market can handle another big hike,” said David Madden, analyst at Equiti Capital. “We are still a long way from the inflation target of 2% (the Fed).”
FOLLOW WALL STREET VALUES
VALUES IN EUROPE
In Europe, defensive sectors are among the biggest decliners, with healthcare down 0.59% and food & beverage down 0.42%.
On the Amsterdam Stock Exchange, distributor Ahold Delhaize rose 7.76% after it raised its full-year earnings per share forecast again, and bank ABN Amro (-0.63%) went into the red after responding Earnings rose to 4.6% for a better-than-expected quarter, with the release of provisions offsetting the rise in costs.
Tour operator TUI slid 3.18% in Frankfurt after reporting a quarterly loss on the back of additional costs caused by the disruption to air travel in Europe.
INTEREST RATES US Treasury yields have fallen as inflation figures approach, erasing some of their gains on Tuesday: 10-year fell to 2.7864%, 2-year to 3.2596%.
In the European market, the 10-year German government bond yield slipped nearly three basis points to 0.898% as euro-zone investors now believe another half-point hike in bank rates is safe in Central Europe in September, Refinitiv data indicates.
Following the drop in Treasury yields, the dollar fell 0.21% against a basket of reference currencies .DXY>, which pushed the euro slightly higher to 1.0232.
Oil prices fell slightly ahead of US inflation and after the American Petroleum Institute (API) published a stronger-than-expected increase in US crude inventories last week.
Brent fell 0.97% to $95.38 a barrel and US light oil (West Texas Intermediate, WTI) 1.01% to $89.59.
(Written by Laetitia Volga, edited by Jean-Stéphane Brosse)