Recession, inflation and rate hikes regain control

Recession, inflation and rate hikes regain control

File photo of a Wall Street sign outside the New York Stock Exchange.

File photo of a Wall Street sign outside the New York Stock Exchange.

PARIS (Reuters) – Wall Street is expected to fall and European stocks fell mid-session on Wednesday, with Europe’s slide deeper into recession and renewed concern over rate hikes sparking buyouts. week.

Futures contracts on major New York indices point to a lower open of 0.74% for the Dow Jones, 0.69% for the Standard & Poor’s 500 and 0.68% for the Nasdaq.

In Paris, the CAC 40 fell 0.72% to 5,995.97 points by 10:55 GMT. In London, the FTSE 100 lost 1.11% and in Frankfurt, the Dax fell 0.75%.

The EuroStoxx 50 index fell 0.85%, the FTSEurofirst 300 0.81% and the Stoxx 600 0.78%.

The latter had led almost 4% compared to the two previous sessions.

The final results of the S&P Global PMI surveys of private sector purchasing managers in Europe have only confirmed that a recession is imminent or already underway in the euro zone, as well as in the UK.

They also underline the persistence of inflationary tensions, which the very likely reduction in oil production by OPEC+ to support the price of a barrel will not help to resolve.

“We expect the euro zone to enter a recession in the third quarter and for three quarters,” says Mateusz Urban, senior economist at Oxford Economics, stressing that “despite the deteriorating outlook, inflation risk remains high.”

The World Trade Organization (WTO) has also significantly lowered its global trade growth forecast for 2023, to 1.0% from 3.4%.

On the interest rate front, while a weaker-than-expected rate cut in Australia had aided Tuesday’s spectacular rally, New Zealand’s central bank tempered general enthusiasm by raising its benchmark rate by half a point to 3.5. %, and hinting that it will. will continue to strengthen in the coming months.

The Wall Street session will be buoyed by the monthly ADP Employment Survey (at 12:15 GMT) and the ISM Services Index (at 14:00 GMT).

SPEED

US Treasury yields rose again after two sharp falls, as remarks from the New Zealand central bank reignited debate over the Fed’s stance in coming weeks.

The ten-year Treasury note recovered more than seven basis points to 3.6908% and its two-year equivalent almost three points to 4.1233%.

In Europe, the ten-year German has risen four points to 1.923%.

CHANGES

The dollar regains some color on the day after its worst session in over two years, with New Zealand’s central bank’s remarks acting as a reminder to traders to continue rate hikes.

The index that measures the dollar’s fluctuations against a benchmark basket gained 0.72% after falling 1.5% on Tuesday. It is still almost 4% below the all-time high recorded last week.

The euro, which had risen to its highest level since September 20 on Tuesday, very close to parity, fell to 0.9919.

The pound sterling, which remained in six rebound sessions, fell 0.92% against the dollar pending the speech of the British Prime Minister, Liz Truss, at the annual congress of the Conservative Party in Birmingham.

VALUES IN EUROPE

The fall in equities did not spare any of the main sectors of the European rating. Among the most marked decreases are that of the automobile, whose Stoxx index lost 2.85%, that of banks (-2.13%) and that of distribution (-2.54%).

The latter is weighed down by the British Tesco, which fell 3.76% after adjusting its annual profit forecast downwards.

In Paris, shopping mall operator Unibail-Rodamco-Westfield fell 5.54%, the biggest drop in the CAC 40.

OIL

The oil market is no stranger to global growth fears coming back to the fore but retains most of the gains made on Monday and Tuesday on the prospect of a sharp production cut by OPEC+, which should be formalized in hours to come.

Brent fell 0.73% to $92.47 a barrel and US light crude (West Texas Intermediate, WTI) fell 0.65% to $87.08.

They had taken respectively 4.4% and 8.8% compared to the two previous sessions.

(Written by Marc Angrand, edited by Jean-Stéphane Brosse)

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