Former Paris Stock Exchange building
by Laetitia Volga
PARIS (Reuters) – Major European stocks are expected to be in the red on Monday as negative sentiment persists in markets, amid fears that central banks are helping plunge the global economy into recession by wanting to rein in the inflation through rate hikes.
Futures contracts give a drop of 0.67% for the Paris CAC 40, 1.01% for the Frankfurt Dax, 0.82% for the London FTSE.
The latter reduced its losses before the information from the BBC that the British government will abandon its plan to abolish the upper bracket of income tax, criticized even in the ranks of the conservatives.
At the beginning of the fourth quarter, the reasons for concern that weighed down the previous three months remain the same: the impact of the tightening of the monetary policies of the main central banks on the economic rhythm, inflationary tensions and the war in Ukraine.
Markets are also bracing for the first “likely to be gloomy” corporate earnings releases, analysts at Saxo Capital Markets said, in light of the uncertain economic environment.
Investors will follow this Monday the publication of the PMI and ISM indices of the manufacturing sector of the euro zone and the United States.
Other appointments of the week, the publication, on Thursday, of the report of the last monetary policy meeting of the European Central Bank and that of Friday, of the monthly report on US employment.
ON WALL STREET
Wall Street closed another drop on Friday, following a choppy session and an eventful quarter amid runaway inflation, tighter monetary policies and recession fears.
The S&P 500, the flagship index of the New York Stock Exchange, recorded its worst month of September since the financial crisis of 2008, with a fall of 9.32%, and the three main indices of the place, S&P, Dow Jones and Nasdaq Composite, recorded its third consecutive week of decline.
During the session, the Dow Jones fell 1.71% to 28,725.51 points, the S&P 500 and the Nasdaq lost 1.51% to 3,585.62 and 10,575.62 points respectively.
Of the 11 sector indices in the S&P 500, only real estate performed well, with the other ten closing in the red, led by technology stocks.
Nike and the Carnival cruise line have warned that inflationary pressures are weighing on their margins. Its titles lost 12.8% and 23.3% respectively.
Index futures suggest a lower open for now.
Tokyo’s Nikkei gained 1.07% as shares linked to semiconductors and the energy sector rallied on rising oil prices.
Stock exchanges in mainland China are closed during the “Golden Week” holiday.
In the currency market, the dollar gained 0.26% against a basket of international currencies, including the euro, which fell to $0.9816.
The pound rose against the dollar (+0.69%) and the euro (+0.49%) following BBC reports of a possible removal of the income tax cap.
Traders will be even more attentive this week to the annual conference of the Conservative Party. On the first day of this congress, Prime Minister Liz Truss did not question her economic project, much criticized for her lack of precision on the financing of the tax relief that she foresees, although she admitted communication errors.
As for government bonds, the ten-year Treasury bond yield fell slightly to 3.7845%. Its German equivalent gained less than a basis point in early trading, at 2.117%.
The oil market is on the upside as OPEC+ plans to cut output by more than a million barrels a day at its meeting on Wednesday, according to multiple sources, which would represent the biggest decline since the COVID-19 pandemic.
Brent gained 2.88% to $87.59 a barrel and US light crude (West Texas Intermediate, WTI) 2.98% to $81.86.
(Written by Laetitia Volga, edited by Bertrand Boucey and Kate Entringer)
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