(Title repeat)

by CORENTIN CHAPPRON

PARIS (Reuters) – Wall Street is expected to be stable at the open on Wednesday and European markets remain cautious mid-session ahead of Fed Chairman Jerome Powell’s statements to Congress later in the day.

Futures on New York indices suggest an opening on Wall Street down 0.05% to 0.10% for the Dow Jones, the Standard & Poor’s 500 and the Nasdaq.

In Paris, the CAC 40 fell 0.15% at 10:50 GMT, while the FTSE in London gained a modest 0.02%, against 0.07% for the Dax in Frankfurt.

The pan-European FTSEurofirst 300 index is down 0.04%, against a drop of 0.05% for the EuroStoxx 50 and 0.14% for the Stoxx 600.

Jerome Powell will be questioned for two days by Congress on the Fed’s monetary policy, starting at 2:00 p.m. GMT, and one of the main questions will be on future rate hikes and the central bank’s terminal rate, at 5 .5%-5.75% according to the forecasts of the governors.

However, the markets believe that the next rate hike, scheduled for July, will perhaps be the last and that the terminal rate will not exceed 5.25%-5.5%.

“The Fed’s dot plots indicate two potential rate hikes this year, and Jerome Powell may have to oppose market expectations that only include one”, summarize the strategists at Rabobank.

“The fact remains that he will have to answer to the elected Democrats, who will ask him to interrupt a process of monetary tightening which will lead to an increase in unemployment, and to the elected Republicans, who will reproach him for not doing enough – not to mention that the Financial stability issues could resurface.”

WALL STREET VALUES TO FOLLOW

Fedex shares fell 3.30% in forefront trading as the company said its margins were under pressure from a slowing freight industry. The group anticipates weak revenue growth for the 2024 fiscal year.

VALUES TO FOLLOW IN EUROPE

Shares of European automakers are rising in Europe, with data from the European Automobile Manufacturers Association (ACEA) indicating that the number of new registrations jumped 18.2% year on year. Renault thus achieves the best performance of the CAC 40, up 2.69%, but the rest of the manufacturers show a more modest increase, from 0.9% to 1.3% for Stellantis, VolksWagen, or BMW.

Deutsche Post, owned by DHL, dropped 2.91% in the wake of disappointing results from FedEx.

Beijer Ref shares fell 7.36%, trailing the Stoxx 600 after EQT sold shares in the group specializing in cooling technologies.

The real estate sector posted the worst performance of the Stoxx 600 sectors, down 1.13%, with the rise in rates in Europe complicating the outlook for the sector.

RATE

In Europe as in the United States, the interest rate markets, sensitive to monetary policy, remain on the watch side.

The yield on the two-year German nibbling 1.3 basis points, to 3.1720%, while the ten-year Bund stagnated at 2.4070%.

In the United States, the yield on ten-year Treasuries rose to 3.7382%, up 1.1 points, against +0.9 points for the two-year, to 4.7066%.

CHANGES

The dollar strengthened by 0.05% against a basket of benchmark currencies, while the euro remained unchanged, trading at 1.0917 dollar (+0.02%).

Conversely, British inflation stronger than expected weighs on the pound sterling, down 0.48% to 1.2701 dollar.

The rate differential between dollar and yen also weighs on the Japanese currency, which erodes by 0.25%, to 141.78 yen per dollar.

OIL

Oil rebounds slightly after two sessions of losses as investors believe figures from the American Petroleum Institute and Energy Information Administration should show falling US oil inventories in a sign of resilient demand, but gains remain limited by concerns about Chinese demand and the positioning of the Fed.

Brent rose 0.18% to 76.04 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.22% to 71.35 dollars.

(Report Corentin Chapron, edited by Claude Chendjou)

Copyright © 2023 Thomson Reuters