Stock market: Cautious rebound in sight in Europe while waiting for the Fed

With Reuters – Europe’s major stock markets are expected to open higher on Monday after closing in the red on Friday amid concerns about interest rates, but the rebound in sight could be undermined by geopolitical tensions and further comments from central bankers.


Index futures suggest a 0.42% gain for the CAC 40 in Paris, 0.43% for the Dax in Frankfurt, 0.41% for the FTSE 100 in London and 0.40% for the EuroStoxx 50.


The CAC 40 recorded a weekly gain of 3.05% last week and the Stoxx 600 rose by 1.40% on the back of strong corporate results, which in Europe partly outweighed macroeconomic concerns linked to the latest US indicators showing persistent inflationary pressures and a buoyant labor market.


The week ahead will be marked by a new series of publications in Europe with Forvia on Monday, Capgemini and Engie on Tuesday, Danone and Eiffage on Wednesday, Axa, Bouygues and Deutsche Telekom on Thursday and Bayer and BASF on Friday.


In the United States, three quarters of the S&P-500 companies have already published, but investors will be watching closely the accounts of Walmart and Home Depot on Tuesday and Nvidia on Wednesday.


Apart from Wednesday’s release of the minutes of the latest U.S. Federal Reserve (Fed) meeting and Friday’s release of the PCE inflation index in the United States, the macroeconomic agenda for the week is virtually empty.


However, questions about the path of rates could continue to fuel concerns as Goldman Sachs and Bank of America Global Research are now betting on three more quarter-point rate hikes by the Fed this year instead of two. At least five Fed officials are also scheduled to speak this week.


In the Eurozone, the European Central Bank’s (ECB) peak deposit rate is now estimated to be around 3.75%, suggesting a further 125 basis points increase from the current level.


Geopolitical tensions could also weigh on the trend, with North Korea firing two ballistic missiles off its eastern coast on Monday, while U.S. Secretary of State Antony Blinken warned his Chinese counterpart Wang Yi of the consequences of Beijing supporting Moscow.




The New York Stock Exchange ended mixed on Friday, as investors worried about the Fed continuing its restrictive monetary policy.


The Dow Jones Industrial Average gained 0.39 percent, or 129.84 points, to 33,826.69 points.


The broader S&P-500 lost 11.32 points, or 0.28 percent, to 4,079.09 points.


The Nasdaq Composite fell 68.56 points (-0.58%) to 11,787.27 points.


In stocks, Microsoft, Nvidia and Amazon declined, weighing on the S&P 500, while the yield on 10-year Treasury bonds hit a three-month high.


Moderna fell after announcing that its experimental messenger RNA flu vaccine did not show in a study that it was at least as effective as an existing vaccine against a strain of the disease.




On the Tokyo Stock Exchange, the Nikkei index ended Monday with a gain of 0.07 percent to 27,531.94 points and the broader Topix advanced 0.39 percent to 1,999.71 points.


In China, the Shanghai SSE Composite gained 1.78% and the CSI 300 gained 2.09%.


China, as expected, decided to keep its main rates unchanged for the sixth consecutive month as the world’s second largest economy shows more signs of recovery from the COVID-19 pandemic crisis.


The loan prime rate (LPR), a one-year interest rate, thus remains at 3.65%, while the five-year rate is unchanged at 4.30%.






The yield on 10-year U.S. Treasuries rose to 3.81% on Monday after climbing to 3.929% on Friday, the highest in three months.




The dollar fell victim to profit-taking and was down 0.08 percent Monday against a basket of benchmark currencies after hitting a six-week high last week.


The Japanese currency, trading at 134.06 yen to the dollar, is at a two-month low, with traders nervous as they await Friday’s confirmation of Kazuo Ueda as Bank of Japan (BoJ) governor.


The euro is trading at $1.0688 after falling to a six-week low of $1.0613 on Friday.




Oil prices, which lost about 4% last week amid concerns about demand, attempted a rebound Monday: Brent crude gained 0.8% to 83.66 dollars a barrel and U.S. light crude (West Texas Intermediate, WTI) 0.69% to 76.87 dollars.


(Written by Claude Chendjou, edited by Kate Entringer)


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