by Claude Chendjou

PARIS (Reuters) – European stock markets ended lower on Tuesday and two of the three Wall Street indices were also in the red at mid-session, as caution remained in order in the absence of an agreement on the American debt while the dollar and bond yields go up.

In Paris, the CAC 40 ended down 1.33% at 7,378.71 points, penalized by the fall in luxury stocks on profit taking. The British Footsie fell by 0.1% and the German Dax by 0.44%.

The EuroStoxx 50 index fell 0.99%, the FTSEurofirst 300 0.62% and the Stoxx 600 0.60%.

At the time of the close in Europe, the Dow Jones is stable, the Standard & Poor’s 500 fell by 0.29% and the Nasdaq by 0.28%.

After discussions deemed “productive” between Democrats and Republicans on the debt ceiling of the United States on Monday, the two camps are still to meet on Tuesday but, by the very admission of the “speaker” of the House of Representatives, the Republican Kevin McCarthy, an agreement on this file is not imminent.

“Markets have seen strong rallies over the past few weeks and the debt ceiling negotiations are an excuse to be cautious right now,” said Peter Cardillo, chief economist at Spartan Capital Securities.

“The real reason for the (equity) brake is the continued rise in (bond) yields,” he added.

The yield of one-month Treasuries hit a historic peak at 5.88%, while the S&P-500 has been moving for two sessions in a narrow range of 30 points.

AT WALL STREET

On Wall Street, some corporate results are driving the exchanges, starting with Lowe’s which takes 2.97% despite the lowering of its annual outlook. Analysts point out, however, that the group’s accounts are not as bad as feared, given the warning issued last week by its competitor Home Depot (+2.30%).

Zoom Video Communications plunged 8.01% as the group posted its weakest quarterly growth.

Broadcom advances by 2.64% thanks to a multi-billion dollar agreement with Apple (-0.89%) in the production of chips in the United States.

VALUES IN EUROPE

The luxury sector in Europe (-4.29%) suffered on the stock market on Tuesday amid profit taking, rising bond yields and signs of falling demand in the United States.

LVMH (-5.01%), Hermès (-6.54%) and Kering (-2.97%) in Paris, Burberry (-3.13%) or even Richemont (-3.51%) elsewhere ended in the red.

Vivendi, the biggest drop in the CAC 40, fell 3.60% due to the sale of shares in the media group by businessman Vincent Bolloré, according to traders.

Societe Generale gained 3.89% as Slawomir Krupa took over the reins of the bank on Tuesday after the tumultuous and long 15-year term of his predecessor Frédéric Oudéa.

Still in the banking sector, the Swiss Julius Baer plunged 7.39%, its capital flows over the first four months of the year having disappointed.

THE INDICATORS OF THE DAY

In the euro zone, growth in activity lost momentum in May with a composite PMI index falling to 53.3 against 54.1 in April, according to the first estimate published on Tuesday.

In the UK, service activity also slowed this month, to 55.1 from 55.9, while manufacturing activity contracted again, to 46.9 from 47.8. The IMF, however, estimated that the UK should escape a recession this year.

Economic activity in the United States, on the other hand, reached its highest level in 13 months in May with a composite PMI index at 54.5 (vs. 53.4 in April) and a services sector at 55.1 (vs. 53 ,6 in April).

CHANGES

The dollar index, measuring the fluctuations of the greenback against a basket of benchmark currencies, hit a two-month high of 103.65 points on Tuesday, on the prospect of further interest rate hikes following comments from several Fed officials, including James Bullard and Neel Kashkari.

The euro fell to 1.0766 dollars (-0.42%), close to the two-month low hit on Friday.

RATE

The ten-year German Bund yield, which fluctuated between 2.455% and 2.497%, as HSBC said it expected a European Central Bank (ECB) deposit rate of 4% by the end of the year , cut its closing gains to about a basis point, at 2.46%.

The yield on US Treasuries of the same maturity took just over two points, to 3.7418%, at a two-month high.

OIL

The oil market is driven by an increase in demand for gasoline in the United States and by the warning of the Saudi Minister of Energy against short sellers. According to Craig Erlam, an analyst at Oanda, this could suggest further production cuts from OPEC+ countries when they meet on June 4.

Brent rose 1.7% to 77.28 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.85% to 73.38 dollars.

(Some data may show a slight shift)

(Written by Claude Chendjou, edited by Bertrand Boucey)

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