RISE IN EUROPE IN SIGHT, WALL STREET OPTIMISM WINS
PARIS (Reuters) – Major European stock markets are likely to rise on Monday after Wall Street’s strong growth on Friday, as investor optimism about the US economy has so far outweighed unpleasant surprises from China.
Futures contracts on indices point to gains of 0.3% for the Dax in Frankfurt, 0.45% for the FTSE 100 in London and 0.37% for the EuroStoxx 50. As for the CAC 40 in Paris, according to the former, it could take around 0.4% indications present.
On Wall Street, the rise accelerated towards the end of Friday’s session, with the leading indices closing near their daily highs, confirming renewed confidence buoyed by the previous days’ inflation numbers in the United States.
Hopes that US inflation has peaked, which could prevent the Federal Reserve from raising interest rates by another three-quarter point next month, therefore remain the key determinant of overall sentiment.
Sentiment is less benign in China, however, where the central bank surprised by announcing a 10 basis point cut in two of its key interest rates after industrial production figures came in below expectations (+3.8% over a year in July), Retail sales (+2.7%) and new bank loans (679 billion yuan last month vs. 1.100 billion expected).
“The decision shows that the authorities were shocked by the July loan numbers and a general slowdown in economic activity,” noted Kaiwen Wang, China strategist at Clocktower Group.
In Europe, the upcoming trading session should be quiet, particularly in Paris as the day is a public holiday in France. In the United States, the only key indicator of the day will be the ‘Empire State’ activity index, which is due at 12:30 GMT, but the main event of the week will be Wednesday’s release of monthly retail sales numbers.
ON WALL STREET
The New York Stock Exchange closed sharply higher on Friday, signing in the green for the fourth straight week as investors continue to bet on inflationary tensions easing and rate hikes slowing.
The Dow Jones Index was up 1.27%, or 424.38 points, to 33,761.05, the Standard & Poor’s 500 was up 72.88 points, or 1.73%, to 4,280.15 and the Nasdaq Composite was up 267.27 points (+2.09%) to 13,047.18.
The S&P 500 and the Nasdaq posted their fourth consecutive positive weekly performance, up 3.26% and 3.08%, respectively.
Amid falling inflation, Wall Street particularly benefited from the early results of the University of Michigan’s monthly Household Sentiment Survey, with its confidence index of 55.1 confirming the recovery that began last month from its all-time low in June.
Futures on the major indices are pointing to an open low of around 0.2% so far.
On the Tokyo Stock Exchange, the Nikkei index is up 1.15% less than an hour from the close, with momentum given by Wall Street being fueled by news out of China such as the downward revision of Japan’s second quarter growth at an annualized rate of 2, 2 outweighed %.
Company results added support to the trend: distributor Pan Pacific, owner of the Don Quijote brand, rose 11.81% after raising its annual earnings guidance.
In China, the Shanghai SSE Composite and CSI 300 are little changed after daily indicators and the surprise interest rate cut.
In the forex market, the People’s Bank of China’s (PBOC) easing monetary policy caused the yuan to fall to its lowest level in a week against the dollar.
Confirmation of the Chinese economy’s slowdown also weighed on the Australian and New Zealand dollars.
Against a basket of reference currencies, the US dollar appreciated by 0.1% and the euro returned to around 1.0250 (-0.10%).
US Treasury yields in Asia fell to 2.8403% for 10-year bonds and 3.2466% for 2-year bonds.
They continue the decline that began on Friday following the announcement of a fall in import prices in the United States last month.
The oil market is falling, punished by both daily indicators in China, the world’s largest importer of crude oil, and statements by Saudi Aramco, the world’s largest exporter, about a possible increase in its production.
Brent fell 1% to $97.17 a barrel and US light oil (West Texas Intermediate, WTI) fell 1% to $91.17.
(Written by Marc Angrand, with Jason Xue and Brenda Goh in Shanghai)