EUROPEAN SCHOLARSHIPS FALL DURING THE SESSION
by Laetitia Volga
PARIS (Reuters) – Wall Street is expected to fall during the open and European equities will be lower mid-session Monday, while bond yields soar on inflation concerns and central bank policy tightening.
Index futures are down 1.67% for the Dow Jones, 2.11% for the Standard & Poor’s 500 and 2.69% for the Nasdaq. In Paris, the CAC 40 lost 2.12% to 6,125.57 around 11.30 GMT. In Frankfurt, the Dax lost 1.78% and in London, the FTSE lost 1.92%.
The pan-European FTSEurofirst 300 index fell 2.04%, the Eurozone’s EuroStoxx 50 2.19% and the Stoxx 600 2.11%.
The prospect of further rate hikes to fight inflation is hurting global equity and bond markets, where government bond yields have reached new highs.
In addition to the tightening of monetary conditions, the indirect effects of the war in Ukraine and the strengthening of an anti-COVID-19 policy in China amplify fears of a sharp slowdown in the global economy.
The Sentix index of investor sentiment in the eurozone is at its lowest point since June 2020, at -22.6 in May, falling for the third straight month as the impact of the crisis in Ukraine on the economy becomes increasingly apparent .
VALUES IN EUROPE
All major sectors on the European rating are in the red with the strongest declines being Basic Resources (-4.11%) and High Tech (-3.65%).
The former is being penalized by the 7% drop in iron ore prices in China on demand concerns, while the latter is being weakened by the level of bond yields.
In Paris, Atos lost 4.63% and ArcelorMittal 2.96%. In London, mining groups Rio Tinto, Glencore and Anglo American posted returns of 4.73% to 5.63%.
Infineon fell 4.78% following Jefferies’ “generally anticipated” increase in its annual revenue target.
Ten-year US Treasury yields rose nearly five basis points to 3.1746%, after peaking at 3.203% since November 2018.
Its German equivalent is also advancing, allowing it to peak at 1.189% since August 2014.
Faced with runaway inflation, markets expect the European Central Bank to raise its rates this year.
Board member Robert Holzmann thinks it’s appropriate for the ECB to pass two or three rate hikes, he said in an interview published Saturday.
The money markets expect the ECB deposit rate to rise by almost 95 basis points by the end of the year.
The dollar is higher, supported by the recovery in government bond yields and fears related to COVID-19 in China. Against a basket of international currencies, it gained 0.17% and peaked nearly twenty years in session.
The euro fell as much as 0.55% to $1.0493 during the session before stabilizing around 1.054. The pound hit its lowest level in nearly two years against the greenback at 1.2258.
The onshore yuan fell to its lowest point since October 2020 after China’s trade data confirmed market concerns about the impact of the lockdowns on the economy: exports rose in April at their lowest pace since June 2020 (+3.9) % on an annual basis), while imports remained stable.
Oil prices are falling sharply, driven by a stronger dollar and demand concerns in China.
Brent fell 2.27% to $109.84 a barrel and US light crude (West Texas Intermediate, WTI) fell 2.46% to $107.07.
(Written by Laetitia Volga, edited by Kate Entringer)