by Claude Chendjou
PARIS (Reuters) – Wall Street is expected in dispersed order at the opening on Friday and European stock markets are on the downside at mid-session in high trading volumes and in a context of volatility fueled by the “four witches ” with the expiry of several futures contracts.
Futures on New York indices signal an opening on Wall Street down 0.44% for the Dow Jones, 0.38% for the Standard & Poor’s 500, while the Nasdaq could grab 0.07%.
In Paris, the CAC 40 fell 0.42% to 6,996.48 points around 12:15 p.m. GMT, in large volumes with a high in the session at 7,104.75 points and a low at 6,993.37 points. In Frankfurt, the Dax fell 0.29% and in London, the FTSE dropped 0.01%.
The pan-European FTSEurofirst 300 index fell by 0.08%, the EuroStoxx 50 for the euro zone by 0.22% and the Stoxx 600 by 0.25%, after sailing in the green for a good part of the morning.
Over the week as a whole, the CAC 40 has lost 3.06% at this stage and the Stoxx 600 2.90%.
The day of the “four witches”, third Friday of March, corresponds to the expiration of four types of derivative products and is usually marked by a certain volatility whereas the market context is already rocked by a banking crisis since the bankruptcy of the American bank SVB and the insolvency risk of Credit Suisse.
A precarious lull has nevertheless returned to the markets since the support provided by the Swiss National Bank (SNB) to Credit Suisse, while in the United States, several large banks, anxious to avoid a domino effect after the bankruptcy of several regional banks last week injected 30 billion dollars into First Republic Bank, victim of a crisis of confidence among investors and customers.
In terms of economic statistics, inflation in the euro zone was confirmed at 8.5% in February the day after the decision of the European Central Bank (ECB) to raise its rates by 50 basis points despite the banking turbulence.
The Governor of the Banque de France, François Villeroy de Galhau, said on Friday that the ECB’s rate hike was a message of confidence in the banks. ECB supervisors, meeting on Friday, further said they did not see any contagion from the current turmoil to eurozone banks, a source said.
Goldman Sachs, however, lowered its ECB rate hike forecast for May by 50 basis points to 25 points and forecasts a terminal rate of 3.5%, down from 3.0% currently, while two “hawks ” of the ECB, Peter Kazimir and Gediminas Simkus, plead on Friday for further increases in the cost of credit.
The market is now awaiting decisions next week from the US Federal Reserve (Fed) and the Bank of England (BoE). A break on interest rates is expected for the latter, while a hike limited to 25 basis points is expected in the United States.
Regarding the economic situation, the OECD raised its forecast for global GDP growth to 2.6% this year and 2.9% in 2024 but stressed that the economy remained fragile.
First Republic Bank fell 3.8% in pre-market trading on Friday after having jumped 10% the day before in the session following aid of 30 billion dollars from several major American banks. The regional bank Pacwest Bancorp dropped 3.0%, while its competitor Western Alliance advanced 1.1%. Big banks JPMorgan Chase, Bank Of America and Wells Fargo gained 0.2% to 1.5%.
Fedex jumped 13% in out-of-hours trading on the back of an increase in its annual earnings-per-share guidance range.
VALUES IN EUROPE
In Europe, the banking index is volatile, moving within a range of +1.1% to -0.44%, while Societe Generale (+2.14%), BNP Paribas (-0.65%) or yet Credit Suisse (-11.18%) are experiencing mixed fortunes.
Over the week as a whole, the banking stock index is heading towards a decline of more than 8%.
Basic resources (+0.18%) and energy (+0.78%) offer more support to the indices, in the prospect of strong demand from China.
In corporate news, Sanofi is in the green after announcing the price reduction of Lantus, its most prescribed insulin in the United States, amid criticism of drug prices and after decisions in the same sense of its competitors Novo Nordisk and Eli Lilly.
Short-term bond yields are also volatile, with the two-year falling nearly four basis points mid-session to 2.52%, after rising as much as 7.5 points in the morning.
In the United States, its equivalent for the same term also lost four basis points, to 4.09%.
The dollar fell 0.2% against a basket of benchmark currencies, in a context of easing pressures on the banking system.
The euro took advantage of this to rise to 1.0627 dollars (+0.21%).
Oil prices are stable with the easing of concerns about banks and a meeting between Saudi Arabia and Russia. Black gold, which is losing 9% for the whole week at this stage, should however show its biggest drop since December.
At mid-session, Brent nibbles 0.11% to 74.78 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.5% to 68.69 dollars.
Gold, a safe haven, is heading for its best weekly performance since mid-November with a gain at this stage of 3.5%, which would be its third consecutive week in the green. The yellow metal took 0.92% to 1,936.69 dollars an ounce around 12:20 GMT.
(Written by Claude Chendjou, edited by Kate Entringer)
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