Market: Volatile session ahead of central bank decisions
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by Claude Chendjou

PARIS (Reuters) – European stocks ended in disarray on Monday, while Wall Street was trading in the red at midday after a volatile session in equity markets linked to the approach of the publication. decisions of several major central banks this week.

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In Paris, the CAC 40 ended down 0.26% at 6,061.59 points. The German Dax, on the other hand, advanced by 0.49%.

The London Stock Exchange remained closed on the occasion of the funeral of Queen Elizabeth II.

The EuroStoxx 50 index fell 0.03%. The FTSEurofirst 300 and Stoxx 600 each fell 0.09%.

The stock markets in Europe, which evolved in the red for a good part of the session, turned around a little more than two hours after the opening of the American markets in the wake of the rebound of the three main Wall Street indices, before end up in disarray.

They had recorded in Europe Friday their worst performance in three months, while on Wall Street the indices had accused their weakest week since that ending on August 26.

“Markets will be looking for direction until the Fed meeting, there won’t be much trading in equities until then,” said Christopher Grisanti, equity strategist at MAI Capital Management, referring to the big two-day meeting of the American central bank which begins on Tuesday.

The CBOE volatility index in the United States, up 26.65 points (+1.33%), is still close to its two-month peak reached last week. Its European equivalent fell slightly, from 0.92% to 26.18 points.

In the United States, money markets are expecting a rise of at least 75 points in Fed rates on Wednesday and the probability of a 100-point hike is estimated at 21% according to CME Group’s Fedwatch barometer.

In the euro zone, where rates were raised this month also by 75 points, the president of the European Central Bank (ECB), Christine Lagarde, is due to speak on Wednesday at an event organized by the Frankfurter Gesellschaft für Handel , Industry and Wissenschaft.

Monetary policy releases from the Bank of Japan (BoJ), the Swiss National Bank (SNB) and the Bank of England (BoE) are expected on Thursday. Apart from Japan, which should opt for the status quo, monetary tightening is also expected in these countries.

VALUES IN EUROPE

On the pan-European Stoxx 600, the automotive sector (+0.74%) was among the biggest risers, while on the other side of the spectrum, real estate (-1.36%) showed the steeper fall, in view of a further rise in the cost of credit.

In business news, TF1 and M6 fell by 2.33% and 3.43% respectively after the abandonment of their merger project.

Volkswagen, which aims for Porsche a valuation of 75 billion euros as part of the IPO of its subsidiary, gained 1.06%.

AT WALL STREET

At the time of the close in Europe, the Dow Jones fell 0.15%, the Standard & Poor’s 500 0.23% and the Nasdaq 0.35%

Microsoft lost 1.29%, while Apple and Tesla, up 0.96% and 1.15% respectively, benefited from bargain shopping despite the imminence of another interest rate hike.

Take-Two Interactive Software fell 0.48% as Bloomberg reported on Sunday that footage of its “Grand Theft Auto VI” game was leaked online by hackers.

CHANGES

On foreign exchange, the dollar was stable (+0.07%) against other major currencies, before the Fed’s decision. The note benefits from its status as a safe haven asset and from expectations of a possible rise in the cost of credit, which is greater in the United States than elsewhere.

The euro, down 0.09%, is trading at 1.0006 dollars, slightly above parity with the greenback.

RATE

In the bond market, yields hit new highs on Monday ahead of central bank decisions.

That of the ten-year German Bund, a reference for the whole of the euro zone, rose in session to 1.81%, the highest since mid-June, before falling back to close at 1.791% (+ 2.6 points). The two-year, the most sensitive to changes in interest rates, climbed to 1.614%, very close to its 11-year peak hit on Friday at 1.62%, before ending at 1.60% ( +5.1 points).

ECB economist Philip Lane said over the weekend that the rise in interest rates could continue into next year, while Luis de Guindos, the institution’s vice-president, said said on Monday that the next rate hikes would depend on macroeconomic data.

In the United States, the yield on ten-year Treasuries jumped in session to 3.518%, the highest since April 2011, and the two-year rose to 3.942%, its highest level since November 2007.

OIL

Oil prices are also volatile, with investors torn between the strength of the dollar, the prospect of lower demand given the expected rise in interest rates in the United States and concerns over supply.

Brent nibbles 0.07% to 91.29 dollars a barrel and American light crude (West Texas Intermediate, WTI) 0.05% to 85.07 dollars.

(Written by Claude Chendjou, edited by Sophie Louet)

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