Fall in sight in Europe, inflation fears grow

Fall in sight in Europe, inflation fears grow

Share it


DROP IN VIEW IN EUROPE, INFLATION FEARS ARE AMPLIFYING

by Laetitia Volga

PARIS (Reuters) – The main European stock markets are expected to fall on Monday, as the latest inflation figures in the United States have revived fears of an aggressive tightening of monetary policy by the Federal Reserve while the health situation in Beijing increases uncertainties for global growth.

The first indications available show a decline of 1.45% for the Paris CAC 40, 1.46% for the Dax in Frankfurt, 0.62% for the FTSE in London and 1.47% for the EuroStoxx 50.

The trend should therefore be negative again in Europe, still affected by the higher than expected rise in consumer price figures in the United States as the Federal Reserve’s monetary policy announcements loom on Wednesday.

Investors fear that the acceleration of inflation to 8.6% over one year in the United States, its highest level since December 1981, will force the American central bank to tighten its monetary policy, with the risk of a blow shutdown for the economy.

Markets are pricing an 80% chance of a half-point Fed rate hike on Wednesday and a 20% chance of a 75 basis point hike.

The Bank of England, which meets its committee Thursday, should also raise its main rate, for the fifth time since December.

Fears for the global economy are further fueled by the COVID-19 crisis in China. Beijing’s most populous district of Chaoyang announced several large-scale testing campaigns on Sunday to stem the spread of the coronavirus.

VALUES TO FOLLOW:

AT WALL STREET

The New York Stock Exchange ended down on Friday following the publication of statistics attesting to the strength of inflation in the United States.

The Dow Jones index fell 2.73% to 31,392.79 points, the S&P-500 lost 2.91% to 3,900.73 points and the Nasdaq Composite fell 3.52% to 11,340.02 points.

Over the week, the S&P lost 5.06%, the Dow 4.58% and the Nasdaq 5.60%, thus signing their worst week since the one that ended on January 21.

Futures currently point to a decline of between 1.07% and 1.79% at the open.

IN ASIA

The drop on Wall Street on Friday weighs on the trend in Asia where the Nikkei on the Japanese Stock Exchange lost 2.97%, falling below 27,000 points for the first time in two weeks.

In China, the Shanghai SSE Composite lost 0.98% and the CSI 300 1.23%.

RATE

Selling in the US bond market continues for the fourth straight session after inflation picked up, pushing yields higher.

That of ten-year Treasuries gained two basis points to 3.1762% after a five-week peak at 3.202%. The two-year rose ten basis points, to 3.1493%, evolving to its highest level since December 2007.

The gap between these two yields, considered a good barometer of growth and inflation expectations, is thus approaching the negative zone.

CHANGES

The dollar gained 0.34% against a basket of reference currencies and reached a peak against the yen since 1998 at 135.17.

“Rising overseas yields and energy prices, coupled with continued dovish messaging from the Bank of Japan, pushed the dollar/yen to a more than 20-year high,” analysts said. from Barclays.

OIL

The oil market is trading in the red as a surge in COVID-19 cases in Beijing dampened hopes of a quick recovery in crude demand in China amid concerns over the global economic outlook with rising of US inflation.

Brent fell 1.57% to 120.1 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.59% to 118.75 dollars.

(Written by Laetitia Volga, edited by Bertrand Boucey)

#Fall #sight #Europe #inflation #fears #grow


Share it