PARIS (Reuters) – Major European equities are expected to rise on Tuesday, with selling pressure likely to ease, at least temporarily, from a volatile session the day before, amid an accelerated revision of U.S. rate hike expectations.
Index futures suggest a rebound of 0.82% for the Dax in Frankfurt, 0.65% for the FTSE 100 in London and 0.74% for the EuroStoxx 50. As for the CAC 40 in Paris, the first indications are that it could rise by about 0 ,eight%. accessible.
The Paris market just lost 8% in five sessions, bringing it back to its lowest level since March 8. As for the broad European Stoxx 600 index, it posted its worst close since March 2021 on Monday after falling 7.12% in five sessions.
This sharp decline can be explained primarily by the rapid upward revision of expectations for higher interest rates by the Federal Reserve as a result of higher-than-expected inflation in the US.
The US Standard & Poor’s 500 joined the Nasdaq on Monday in a bear market, down more than 20% from its January record.
“The last time the S&P 500 fell for four consecutive days of this magnitude was in March 2020,” said John Plassard, director of Mirabaud Securities.
Goldman Sachs, for example, announced Monday night that it now expects a 75 basis point rate hike on Wednesday and into next month, with the estimated likelihood of a three-quarter point increase in the “fed funds” target rate. from 30% to 96% in less than 24 hours according to the CME FedWatch barometer.
“If all goes according to plan, that means the Fed’s main benchmark interest rate will rise by 1.5 percentage points in just three months,” Plassard said.
For investors, however, such a rapid rise in the cost of credit could send the world’s largest economy into recession and reduce the profitability of listed companies.
Another unfavorable forecast for the markets: a further deterioration in the health situation in China, where the authorities decided to test several million people in Beijing after discovering a cluster in a bar.
US government bond yields were little changed in Asian trading, but retained much of Monday’s sharp gains, with 10-year bonds reaching their highest level since 2011 at 3.381% and 2-year bonds rising to their highest level since December 2007 at 3.283%. and the five-year hit 3.489%, the highest level since July 2008.
However, the 2- and 10-year parts of the yield curve, which briefly reversed, turned positive again.
A highly unusual degree of uncertainty over the Fed’s decisions derailed Monday’s three-month, $45 billion Treasury securities auction, which Jefferies economists called “historically horrific.”
ON WALL STREET
The New York Stock Exchange ended sharply lower on Monday and pushed the Standard & Poor’s 500 index back into the danger zone of the bear market, while bond yields went in the opposite direction and increased impressively.
The Dow Jones fell 2.79% or 876.05 points to 30,516.74, the S&P 500 fell 151.23 points or 3.88% to 3749.63 and the Nasdaq Composite fell 530.8 points (-4.68%) to 10,809.23 points.
At this level, the S&P 500 is down nearly 22% from its January 3 close peak of 4,976.56 and is officially in a bear market. The CBOE Volatility Index, also known as the “Fear Index”, closed at its highest level since May 9.
All major segments of the S&P 500 were in the red, and only ten stocks included in it were in the black. On the Dow, the sharpest declines were in Boeing, which fell 8.75%, Salesforce (-6.89%) and Dow (-5.3%).
Futures are currently pointing to a higher open.
On the Tokyo Stock Exchange, the Nikkei index lost 1.68% less than an hour before the close and touched its lowest level since May 19 in the session due to the prospect of accelerated Fed tightening and fears of new medical restrictions on China.
Chinese markets are also down, with the Shanghai SSE Composite shedding 1.02% and the CSI 300 shedding 1.31%.
The dollar was virtually unchanged against other major currencies, approaching a 20-year high on Monday, thanks to the double carry-over effect of US interest rate hike expectations and a decline in safe-haven assets.
The yen, which had risen earlier in the session, fell again after the Bank of Japan announced a new package of 800 billion yen government bond purchases aimed at reducing yields.
The euro rebounded slightly to $1.0419 after briefly falling below $1.04, its lowest level since May 16.
Major cryptocurrencies rose to $22,980.39 per bitcoin (+2.36%) and $1,228.21 per ether (+1.61%).
The oil market, which ended higher on Monday after spending most of the day in negative territory, is currently teetering between recession fears and signs of a supply shortage.
The latter are indeed exacerbated by the fall in Libyan exports.
Brent fell 0.11% to $122.14 a barrel, while US light crude (West Texas Intermediate, WTI) fell 0.06% to $120.86.
(written by Marc Angrande)