Sunday, October 1, 2023

Europe ends in the red on rate fears By Reuters

Europe ends in the red on rate fears By Reuters ©Reuters. Photo of the Euronext stock exchange, in the La Défense financial district in Paris, France. /Photo taken on September 30, 2022/REUTERS/Benoit Tessier

by Claude Chendjou

PARIS (Reuters) – European stock markets closed lower on Monday, and Wall Street was trading on a hesitant note mid-session, with investors showing caution ahead of monetary policy announcements from several major central banks, including the United States Federal Reserve (Fed) and the Bank of England (BoE).

In Paris, it was penalized by the 12% fall of Société Générale (EPA:), whose new CEO Slawomir Krupa was not convinced with his strategic plan, and ended up losing 1.39%, up to 7,276.14 points. The British Footsie lost 0.76% and lost 1.05%.

The index fell 1.14%, 1.04%, and 1.13%.

In Europe, the optimism born last week regarding the prospect of an end to the rate hike by the European Central Bank (ECB) gave way on Monday to new fears about the path of the rates of the main central banks.

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Several ECB officials, such as Bostjan Vasle and Robert Holzmann, stressed that a further increase in the cost of credit cannot be ruled out, while Peter Kazimir stated that it was necessary to wait until spring to conclude that the peak of rates had been reached.

In Great Britain, where the Bank of England must make its decisions on Thursday, the market expects a new increase in the main interest rate to 5.50%, while in the United States uncertainty persists over the choice of the Federal Reserve to the November meeting and after the status quo scheduled for Wednesday.

“With inflation still well above the Fed’s 2% target, a further rate hike is certainly more likely than a rate cut, despite the markets’ best wishes,” Saira Malik wrote in a note. , investment manager at Nuveen.

Decisions from the Swiss, Norwegian, and Japanese central banks are also expected this week, as well as monthly inflation figures in the eurozone and several European countries.

VALUES

Société Générale (-12.05%) encouraged the Paris stock markets, finishing at the bottom of the CAC 40 and registering one of the biggest falls in the pan-European Stoxx 600 index after the presentation of the bank’s strategic plan for 2026.

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The technology sector (-1.29%) was also affected by rising bond yields and the reduction of Nordic Semiconductor’s forecast (-9.95%) for the current quarter.

The healthcare index (-1.83%) was hurt by Lonza (SIX:), as CEO Pierre-Alain Ruffieux decided to leave the pharmaceutical company at the end of the month, raising concerns about the group’s profit prospects.

A WALL STREET

At the time of closing in Europe, the advance of 0.23%, the Standard & Poor’s 500 of 0.27%, and that of 0.22% in a volatile session, marked by the fall of some of the main technological stocks and growth like Nvidia (NASDAQ: ) (-0.39%) and Tesla (NASDAQ:) (-2.75%).

Chip designer Arm Holdings, which made a successful Nasdaq debut last week, lost 5.54%, and Bernstein began following the lead of “underperforming” stocks amid demand concerns in the sector.

CHANGES The dollar index, which measures the fluctuations of the greenback against a basket of international currencies, reached its highest level in six months on Monday, at 105.32 points, before the decisions of the Federal Reserve, some experts, such as Alvin Tan of RBC Capital Markets, believing that the American economy is stronger than that of Europe or Asia.

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The euro is trading at $1.0686 (+0.29%) and the pound sterling at $1.2396 (+0.06%).

RATE

The 10-year German Bund yield ended up rising almost five basis points to 2.718%, and the two-year yield also rose about five points to 3.262%.

In the United States, the yield on 10-year Treasury bonds hit a nearly 16-year high of 4.399%, the highest since November 2007. Two-year bonds have once again surpassed the 5% threshold.

OIL

The prospect of a drop in OPEC+ crude oil extractions by the end of the year combined with forecasts of strong demand in China is dragging down the oil market, which is heading for a third consecutive session in the green.

The barrel advanced 0.63% to $94.52 and West Texas Intermediate, WTI rose 1.16% to $91.82.

(Written by Claude Chendjou, edited by Bertrand Boucey)

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