by Laetitia Volga

PARIS (Reuters) – Wall Street is expected to open slightly lower and European stocks fell mid-session on Wednesday, the time not being to take risk for the last session of the month in the face of uncertainties over the debt ceiling US and signs of an economic slowdown in China. The “futures” on New York indices suggest an opening of Wall Street down 0.2%. In Paris, the CAC 40 lost 0.52% to 7,172.28 at 11:08 GMT, the lowest since the end of March. In Frankfurt, the Dax lost 0.4% and in London, the FTSE 0.12%.

The pan-European FTSEurofirst 300 index fell 0.17%, the Eurozone EuroStoxx 50 fell 0.48% and the Stoxx 600 fell 0.24%.

The latter is heading for its largest monthly decline since December and the MSCI world index could also end the month of May with a negative performance. China’s economy continues to show signs of slowing: the official manufacturing PMI contracted more than expected in May while growth in services activity slowed to its slowest pace in four months.

Stock markets in China have again ended in the red and the Hang Seng in Hong Kong, losing nearly 2%, is close to the “bear market”, a drop of more than 20% from its peak in January.

“If the market was hoping for China to come to the rescue, I think it is wrong. COVID-19 has done a lot of structural damage to the Chinese economy,” said Michael Hewson, at CMC Markets.

In the United States, the trend will once again be focused on the issue of the public debt ceiling. The agreement brokered by President Joe Biden and House of Representatives speaker Kevin McCarthy cleared a significant hurdle on Tuesday night, getting the green light from a House committee for an in-session debate on the entire text .

A vote in the lower house for its adoption is expected on Wednesday.

VALUES IN EUROPE

On the European stock markets, the lack of dynamism of the Chinese economy penalizes in particular the automotive sectors (-0.72%), basic resources (-0.7%) and the luxury industry ( -1.6%).

In individual values, LVMH, TotalEnergies and Kering are among the biggest drops in the CAC 40, with declines of 1.33% to 2.59%, while Veolia, a defensive value, gains 2.20%.

RATES Bond yields in the euro zone fell sharply, the announcement in the morning of a slowdown in inflation in France and in several German Länder, including in North Rhine-Westphalia, reviving speculation on the fact that the Central Bank European Union is closer to the end of the tightening cycle than previously expected.

The first inflation estimate for all of Germany is due at 12:00 GMT.

Yields on the Bund and the 10-pound OAT fell to their lowest level in almost three weeks, at 2.252% and 2.825% respectively.

Their US equivalent drops four basis points to 3.6522%.

“Inflation remains elevated but overall price pressures are easing, which means central banks may need less restrictive monetary policy,” said Sebastien Fellechner, at DZ Bank, who still expects two more 25 basis point rate hikes from the ECB.

The institution’s vice-president, Luis de Guindos, described inflation figures in Europe as “positive”, while the governor of the Banque de France, François Villeroy de Galhau, said that inflation could have exceeded its peak in France.

CHANGES

In the wake of the decline in European bond yields, the euro sz fell 0.51% to 1.0678 dollars.

The dollar, also benefiting from uncertainties about the Chinese economy, appreciated by 0.35% against a basket of benchmark currencies.

OIL/METALS

Concerns about Chinese demand are affecting oil prices: Brent fell 2.33% to $71.83 a barrel and US light crude (West Texas Intermediate, WTI) 2.52% to $67.71.

Copper and aluminum prices are also falling for the same reason.

(Laetitia Volga, edited by Blandine Hénault)

Copyright © 2023 Thomson Reuters