by Laetitia Volga

PARIS (Reuters) – European stock markets ended lower on Wednesday, as concerns about the Chinese economy and caution over the US debt issue weighed on the trend for the last session of the month.

In Paris, the CAC 40 lost 1.54% to 7,098.7 points. The British Footsie lost 0.98% and the German Dax 1.54%.

The EuroStoxx 50 index fell by 1.71%, the FTSEurofirst 300 by 1.13% and the Stoxx 600 by 1.07%.

The month of May ended with a decline of 5.24% for the CAC 40, its first weekly decline since December, and 3.23% for the Stoxx 600.

The start of the day in Europe was undermined by poor Chinese PMI figures, particularly in industry where activity contracted more than expected in May.

Concerns about the lack of dynamism of the Chinese economy despite the end of the COVID-19 epidemic logically weighed on the country’s stock markets. The Hang Seng index in Hong Kong, losing nearly 2%, is close to the “bear market”, a drop of more than 20% compared to its peak in January.

In the United States, the file of the ceiling of the public debt continues to make speak. 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.

“There is a very low risk of a problem tonight (…) but until the final document is signed on the desk of President Joe Biden, apprehension is not abnormal”, has said Ryan Detrick, chief strategist at Carson Group.

At the time of the close in Europe, Wall Street was losing 0.7% to 0.9%.

RATE

Following Tuesday’s announcement of a slowdown in Spanish inflation, today’s data showed a larger-than-expected moderation in consumer price inflation in France and Germany.

For strategists like Carl Hammer at SEB, the lull in inflationary pressures in several euro zone countries could lead the European Central Bank to temper the rise in its rates in the coming months.

Thus, bond yields fell sharply: that of ten-year German bonds lost nearly seven basis points to 2.272% and its French equivalent ended around 2.85%.

The US market followed suit and the yield on ten-year Treasuries fell four basis points to 3.656%.

CHANGES

The euro, at $1.0655, fell to its lowest level since March 20. The dollar index, which measures the variations of the greenback against a basket of currencies, gained 0.26%.

The dollar amplified its advance after the Labor Department announced a bigger-than-expected increase in the number of job openings in April, a sign of resilience in the US labor market that could constrain the Federal Reserve to raise interest rates further in June.

Traders estimate a nearly 70% chance of a quarter-point rate hike in two weeks.

VALUES

On the stock market, all the major European sectors fell. The Stoxx auto index (-2.47%), a sector highly exposed to China, posted the largest decline.

In Paris, Renault lost 4.31% and Stellantis 3.47%.

Capgemini (+6.82%) finished at the top of the SBF 120 after announcing the extension of a partnership with Google Cloud in the more popular than ever field of artificial intelligence.

OIL

Concerns about Chinese demand and the strength of the dollar affect the oil market where Brent fell 1.02% to $72.79 a barrel and US light crude (West Texas Intermediate, WTI) 0.71% at $68.97.

(Laetitia Volga, edited by Jean-Stéphane Brosse)

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