by Laetitia Volga

PARIS (Reuters) – Wall Street is expected to see little change on Tuesday as most European stocks retreat mid-session, concerns over the U.S. debt ceiling and the approaching monetary meeting of the Federal Reserve and the European Central Bank keeping investors on the defensive. Futures contracts signal a decline of 0.13% for the Dow Jones, 0.14% for the Standard & Poor’s-500 and 0.02% for the Nasdaq. In Paris, the CAC 40 lost 0.47% to 7,456.49 around 11:30 GMT. In Frankfurt, the Dax dropped 0.21% and in London, the FTSE gained 0.06%, supported by HSBC.

The pan-European FTSEurofirst 300 index lost 0.14%, the EuroStoxx 50 of the euro zone 0.33% and the Stoxx 600 0.25%.

Investors’ caution could last at least until the publication of the Fed’s monetary policy statement on Wednesday evening. According to a Reuters survey of economists, the US central bank is expected to raise the fed funds rate by a quarter point.

And for many pundits, this could be its last run this cycle, especially given the opposition between Democrats and Republicans over raising the US debt ceiling and the recent turmoil in the banking sector.

The ECB will also be featured this week. Analysts argue that the tightening of access to bank credit in the currency bloc and the deceleration of underlying inflation in April argue for a rate hike limited to 25 basis points on Thursday. WALL STREET VALUES TO FOLLOW

VALUES IN EUROPE

On the stock market, the European banking index (+1.39%) posted the biggest increase of the day, supported by the 5.89% increase in HSBC. The British bank saw its profit triple in the first three months and announced the payment of its first quarterly dividend since 2019.

The sector also benefited from the announced takeover of most of the assets of the bankrupt American bank First Republic by JPMorgan, for 10.6 billion dollars.

The oil group BP gave up 4.98% after announcing a share buyback program for an amount lower than the previous one.

Sanofi yields 2.14% after the degradation of the recommendation of Deutsche Bank to “sell”.

Electrolux gained 4.04% in response to information from the Bloomberg agency that the Chinese Midea would be interested in the Swedish household appliance specialist.

RATE

On the European bond market, which is reopening after a long weekend, the ten-year German is catching up with its American equivalent and gains five basis points to 2.37%.

Yields on Treasuries indeed rose sharply on Monday thanks to JPMorgan’s takeover of most of First Republic’s assets and the rise of the ISM manufacturing index.

This Tuesday, the ten-year American now yields more than three basis points, at 3.5281%.

Premiums required to hedge against the risk of a US default on its debt are up as the yield on one-month T-bills soar 28 points, after Treasury Secretary Janet Yellen said that the United States could be in default of payment as of June 1st.

CHANGES

The dollar advanced very slightly against a benchmark basket of six major international currencies and the euro retreated below 1.096.

The Australian dollar jumped in session up to 1.3% after the unexpected decision of the Australian central bank to raise its key rate by a quarter of a point, because inflation remains too high.

OIL

The announcement of the contraction in April of the official Chinese manufacturing PMI, a first since December, and expectations of a rate hike in the United States are weighing on the oil market.

Brent lost 0.37% to 79.02 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.37% to 75.38 dollars.

MORE ECONOMIC INDICATOR ON TODAY’S AGENDA

(Laetitia Volga, editing by Kate Entringer)

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