by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to rebound very slightly at the opening on Thursday after two consecutive sessions of decline linked to the deadlock in negotiations on raising the American debt ceiling.

Futures contracts on indices suggest an increase of 0.11% for the CAC 40 in Paris, 0.08% for the Dax in Frankfurt, 0.13% for the FTSE 100 in London and 0.09% for the EuroStoxx 50.

As the June 1 deadline approaches, a date confirmed by US Treasury Secretary Janet Yellen on Wednesday, the stalemate in US debt negotiations has fueled risk aversion in recent sessions.

“These updates that we’re getting that talks are progressing or stalling, those are just additional sources of volatility,” said Matt Stucky, portfolio manager at Northwestern Mutual Wealth Management Company.

The rating agency Fitch on Wednesday placed the sovereign rating of the United States under review for a possible degradation.

The VIX index, considered a reliable barometer of fear in the markets, approached a three-week high on Wednesday, jumping nearly 10% above 20 points.

To these concerns are added questions about the evolution of the economy, the second estimate of the gross domestic product (GDP) US for the first quarter being expected at 12:30 GMT, at the same time as the weekly statistics of jobless claims.

The market will take notice on Friday of the PCE price index for the month of April, the preferred measure of inflation by the US Federal Reserve, as the minutes of its last monetary policy meeting showed that the officials of the Fed were “broadly agreed” that the need to continue raising interest rates had become “less certain”. Some members of the FOMC, however, argued in favor of maintaining the Fed’s options on rates, a sign of a certain division, according to Ray Attrill, head of foreign exchange strategy at National Australia Bank.

Faced with the risk of significant collateral damage for the economy, voices are also being raised within the Fed for a modification of the inflation target of 2%, according to recent remarks made by officials of the institution.

For now, the markets are banking on a 33.6% probability of a further 25 basis point rate hike in June compared to a probability of 28% last week, according to CME Group’s FedWatch barometer.

AT WALL STREET

The New York Stock Exchange ended lower on Wednesday as talks between the White House and congressional leaders on raising the US debt ceiling still stalled, raising the specter of a default. payment from the beginning of June.

The Dow Jones index fell 0.77%, or 255.59 points, to 32,799.92 points.

The broader S&P-500 lost 30.34 points, or 0.73%, to 4,115.24 points.

The Nasdaq Composite fell for its part by 76.08 points (0.61%) to 12,484.16 points.

Ten of the eleven major sectors of the S&P-500 ended the session in the red, first and foremost real estate. Only energy ended up.

On the values ​​side, among the movements to note, the 3.1% decline of Citigroup after the bank changed its mind about the sale of its Mexican unit Banamex for 7 billion dollars.

IN ASIA

As the closing of the Tokyo Stock Exchange approaches, the Nikkei index advances by 0.24% to 30,756.6 points but the Topix, broader, loses 0.3% to 2,146.04 points

The MSCI index comprising stocks from Asia and the Pacific (excluding Japan) fell 0.84%, the lowest since March 21 and on track for a second consecutive session in the red.

In China, the Shanghai SSE Composite dropped 0.41% and the CSI 300 lost 0.34%.

EXCHANGES/RATES

At foreign exchange, the dollar index rose by 0.22% against a basket of reference currencies. The greenback is at a two-month high against the euro and a six-month high against the yen.

The euro is displayed at 1.0732 dollars (-0.15%).

The yield on two-year US Treasury bills, the most sensitive to interest rate expectations, jumped 6.4 basis points to 4.4047%.

OIL

The oil market is stabilizing after the strong increases of the previous sessions linked in particular to the prospect of a new reduction in production by OPEC+ in view of the warning issued by the Saudi Minister of Energy against investors betting on a decline in prices.

Brent fell 0.14% to 78.25 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.3% to 74.12 dollars.

(Written by Claude Chendjou, edited by Bertrand Boucey)

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