THE MAIN EUROPEAN EXCHANGES ARE EXPECTED WITHOUT MAJOR CHANGES
by Laetitia Volga
PARIS (Reuters) – Major European stock markets are expected to be flat at the open on Friday, as investors remain uncertain about the degree of aggressiveness with which the Federal Reserve will raise interest rates in the United States despite slowing inflation in March will increase last month .
The first available indicators point to a decline of 0.04% for the Paris CAC 40, 0.07% for the Dax in Frankfurt, 0.02% for the FTSE in London and 0.05% for the EuroStoxx 50.
The release on Thursday of an unexpected monthly decline in the US Producer Index confirmed the doldrums on the US inflation front after the price reading came in below consumer expectations.
While this initially cheered investors by raising hopes of a less restrictive monetary tightening than expected from the Fed, several officials at the institution warned against being overly optimistic.
San Francisco Fed Chair Mary Daly said on Thursday that while a half-point rate hike in September made “making sense,” she was open to the possibility of a larger rate hike given inflation, which is still more than four times higher as high as the 2% target.
“The market will realize that the Fed’s policy committee still has work to do and that it needs to raise the Fed’s interest rate target to 4% by the end of the year,” said Carol Kong of the Commonwealth Bank of Australia. “I think there is some leeway for markets to upgrade their expectations for the ‘Fed Funds’ rate.”
ON WALL STREET
The New York Stock Exchange ended Thursday in a mixed order, with the Nasdaq and S&P 500 closing slightly lower amid ongoing uncertainties about the pace of the Fed’s tightening.
The Dow Jones index rose 0.08% to 33,336.67 points, the Nasdaq Composite fell 0.58% to 12,779.91 points and the S&P 500 fell 0.07% to 4,207.33 points.
The latter hit a three-month high during the session on producer price data, but Fed officials left little doubt that they intended to tighten monetary policy until inflationary pressures subsided completely.
In terms of stocks, Disney rose 4.68% after announcing that its video-streaming platforms had surpassed Netflix’s subscriber base.
Futures contracts signal a slight upward movement from 0.1% to 0.3%.
On the Tokyo Stock Exchange, which was closed for a holiday on Thursday, the Nikkei rose 2.36% to its highest level since mid-January, in turn reacting to slowing inflation in the United States.
SoftBank, the top contributor to the index’s rise, rose 5.81% after announcing it would make a $34.1 billion profit by reducing its stake in Alibaba.
Honda Motor rose 3.47% as the automaker raised its full-year operating profit forecast thanks to the weak yen.
In China, Shanghai’s SSE Composite Index and mainland China’s large-cap CSI 300 lost 0.14% amid the COVID-19 outbreak.
The health authorities listed more than 2,000 new infections with the SARS-CoV-2 coronavirus on Wednesday and Thursday, compared to around a thousand in the previous days.
The dollar is slightly higher (+0.1%) against a basket of international currencies and the euro is stable at 1.032.
In the bond market, the 10-year Treasury yield fell slightly to 2.8657% on the day after a three-week high of 2.902%, as investors put into perspective the impact of the latest US inflation numbers on the Fed’s resolve to continue tightening.
Oil prices fell amid uncertainty over the demand outlook following divergent forecasts from OPEC and the International Energy Agency.
Brent fell 0.54% to $99.06 a barrel and US light oil (West Texas Intermediate, WTI) fell 0.6% to $93.77.
(Written by Laetitia Volga, edited by Matthieu Protard)