Risk appetite trumps rates and expensive oil

Risk appetite trumps rates and expensive oil

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RISK TASTE TAKES OFF RATES AND EXPENSIVE OIL

(Reuters) – European stock markets ended sharply higher on Monday as investors momentarily put aside concerns about interest rates and soaring oil prices to favor a return to growth stocks, taking advantage of reassuring news from China.

In Paris, the CAC 40 gained 0.98% (63.48 points) to 6,548.78 points after returning to 6,600 points for the first time since April 29 and in Frankfurt, the Dax took 1.34% while that in London, where markets reopened after Queen Elizabeth II’s four-day Platinum Jubilee weekend, the FTSE 100 advanced 1.12%.

The EuroStoxx 50 index posted a closing increase of 1.45%, the FTSEurofirst 300 of 1.01% and the Stoxx 600 of 0.92%.

At the time of the close in Europe, Wall Street was also evolving in the green, the Dow Jones winning 0.31%, the Standard & Poor’s 500 0.67% and the Nasdaq Composite 0.83%.

The US-listed share of Chinese ride-hailing giant Didi Global soared more than 45% after reports from the Wall Street Journal that Beijing is preparing to allow its return to mobile app stores after a lengthy cybersecurity investigation.

The renewed appetite for risk is also benefiting from a further easing of health restrictions in Beijing and Shanghai and from statements by Gina Raimondo, the American Secretary of Commerce, according to which the Biden administration is studying the possibility of reducing certain customs on Chinese products.

The rest of the week could be more delicate, with the monetary policy meeting of the European Central Bank (ECB) on Thursday and the publication of monthly consumer price figures in the United States on Friday, pending the meeting of the Federal Reserve. June 15.

“There are still doubts whether or not inflation has peaked,” said CMC Markets analyst Michael Hewson. “We’re kind of in a no-man’s land right now on that like reopening China and the ripple effect it could have. Oil prices are still a liability, so it’s difficult to hold a given course.”

VALUES

On Wall Street, the rebound in equities primarily benefits growth stocks such as IBM (+1.51%) or Apple (+0.55%) while in Europe, the best sector performances of the day are for the sector raw materials (+2.48%), that of high technologies (+1.86%) and that of banks (+1.65%).

In Paris, Worldline gained 2.08% and Societe Generale 2.6% while in London, the mining giant Rio Tinto took 3.44%.

Luxury stocks benefited from the lifting of health restrictions in Beijing: Kering gained 0.98%, LVMH 0.77% and Hermès 0.71%.

Down, the steelmaker Aperam lost 1.16% after the unanimous decision of the board of directors of its competitor Acerinox (-0.76%) to end discussions for a possible merger.

RATE

Yields on US government bonds are rising ahead of major auctions in the coming days and the release of US inflation figures on Friday.

The Treasury plans to issue $96 billion in debt this week, including $44 billion in three years on Tuesday, $33 billion in ten years on Wednesday and $19 billion in 30 years on Thursday.

With institutional investors bracing for this massive influx of securities, the ten-year yield is up nearly seven basis points to 3.0251%, the highest since May 11.

This movement had a marked ripple effect on the European market: the ten-year German, which was trading below 1.27% before the opening of Wall Street, ended the session at 1.317%, the highest since 2014.

The Italian ten-year ended almost stable at 3.407% after falling for most of the session in reaction to an article in the Financial Times according to which the ECB is considering a new program of security purchases to help the most vulnerable in the euro area.

CHANGES

The dollar, penalized at the start of the day by the general renewed appetite for risk, rose again against the other major currencies (+0.26%) thanks to the rise in Treasury yields.

The euro thus returned to 1.0694 dollars (-0.23%) after rising to 1.0751.

The pound sterling remains well oriented against the greenback (+0.39%) as against the single European currency (+0.58%) before the vote of confidence of the conservative deputies, decisive for the political future of Prime Minister Boris Johnson, with currency traders betting on his retention.

OIL

The price of a barrel of crude fell after crossing the threshold of 120 dollars at the start of the day thanks to Saudi Arabia’s increase in its selling prices for the month of July.

The market is still waiting on the will of the OPEC+ producing countries to reduce tensions on the world market.

Brent fell 0.28% to 119.38 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.45% to 118.33 dollars. They had previously gone up to 121.95 and 120.99 dollars respectively.

(Written by Marc Angrand)

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