by Claude Chendjou

(Reuters) – The main European stock markets are expected to be green again on Tuesday as the banking sector calms down after the Credit Suisse bailout, but this expected rise could be weakened by speculation around the Federal Reserve’s decisions American (Fed) which begins a two-day meeting.

Futures contracts on indices suggest an increase of 0.73% for the CAC 40 in Paris, 0.92% for the Dax in Frankfurt, 0.46% for the FTSE 100 in London. The EuroStoxx 50 is expected to gain 0.86% as the Stoxx 600 rebounds Monday from more than a three-month low.

The rescue of Credit Suisse, orchestrated in emergency during the weekend by the Swiss authorities, which encouraged UBS to buy out its competitor, was not enough at first to appease the markets. But on Monday, at the end of the session, the banking sector recovered thanks in particular to statements deemed reassuring by supervisors in Europe on bondholders who had initially felt aggrieved by the Credit Suisse rescue plan, fearing that this sets a precedent. The main central banks have also pledged to provide liquidity in dollars to stabilize the financial system.

“Overall, I think we’re far from off the hook on this,” said Brian Johnson, banking analyst at Sydney-based Jefferies, referring to the current stress in the markets.

It is in this context that the monetary policy statement from the Fed, which meets this Tuesday for two days, is particularly watched. According to CME Group’s FedWatch Barometer, traders are torn between the likelihood of a quarter-point rate hike and a status quo.

Fed Chairman Jerome Powell said developments in the cost of credit would depend on data received up to the bank’s meeting. US home resales figures for February are due out at 14:00 GMT.

In Today’s Economic Indicators in Europe, investors will take notice of the Zew Economic Sentiment Index in Germany at 09:00 GMT.

AT WALL STREET

The New York Stock Exchange ended higher on Monday, comforted by the takeover of Credit Suisse, which seems to remove the risk of banking contagion.

The Dow Jones Industrial Average gained 1.20%, or 382.6 points, to 32,244.58 points.

The broader S&P-500 gained 34.93 points, or 0.89%, to 3,951.57 points.

The Nasdaq Composite advanced for its part by 45.03 points (0.39%) to 11,675.54 points.

In values, the regional bank First Republic Bank fell by 47%, S&P Global having downgraded its credit rating to speculative category (“junk”) amid liquidity problems.

IN ASIA

The Tokyo Stock Exchange is closed on Tuesday due to a public holiday in Japan.

In China, the Shanghai SSE Composite gained 0.58% and the CSI 300 gained 1.03%.

The MSCI index comprising stocks from Asia and the Pacific (excluding Japan) rose by 0.4%.

CHANGES

The dollar rose slightly (+0.11%) on Tuesday against a basket of reference currencies with the easing of tensions in the markets.

The euro, down 0.11%, was at 1.0707 dollars.

RATE

The yield on ten-year US Treasury bills advanced by around two basis points, to 3.49%, and the two-year one, the most sensitive to changes in interest rates, took more than five points, at 3.97%.

The yield on the latter maturity, however, was still at a 15-year high on March 8, at 5.084%, after Jerome Powell’s hearing before Congress and before the collapse of the American bank SVB, which marked the start of the crisis in the sector.

In the first exchanges in Europe, the yield of the ten-year German Bund is practically stable, at 2.11%, and that of two years is up 2.5 points, at 2.34%.

OIL

Oil prices, which recently fell to a 15-month low, remain well below the 80 dollar mark: Brent yields 0.83%, to 73.18 dollars a barrel, and American light crude (West Texas Intermediate, WTI) also fell 0.83% to 67.08 dollars.

(Report Claude Chendjou, edited by Bertrand Boucey and Kate Entringer)

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