by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to fall on Wednesday at the opening in a context of concern over the evolution of the global economy, particularly in China, while data are due to be published during the day on the economic activity in Europe.

According to the first indications available, the Parisian CAC 40 should lose 0.21% at the opening, the Dax in Frankfurt 0.14% and the FTSE 100 in London 0.07%. The EuroStoxx 50 index is expected to fall by 0.20%.

On today’s agenda, activity in China’s services sector slowed in June to 53.9 from 57.1 in May, according to the PMI index calculated by Caixin and S&P Global. This is the slowest pace in five months. With the deterioration observed at the start of the week on manufacturing activity, the composite index shows a deceleration to 52.5 in June, against 55.6 the previous month, a new sign that China’s post-COVID-19 recovery is losing of its momentum.

The market is now awaiting final monthly services PMI figures in Europe after Monday’s release of manufacturing PMIs showed a worsening decline in activity in the EU bloc.

The ISM monthly services indicator in the United States will be published on Thursday, the same day as the ADP employment survey, ahead of the official monthly report from the Labor Department on job creations, the unemployment rate and salaries.

These new data should provide investors with elements on the path of interest rates and the evolution of the economy as the US Federal Reserve (Fed) is due to publish at 6:00 p.m. GMT the minutes of its monetary policy meeting on 13 and June 14.

The market is pricing in one or two more Fed rate hikes by the end of the year, which would bring the Fed rate target to 5.25-5.50% or 5.50%-5, 75%, while in the euro zone, Morgan Stanley and UBS said this week forecast a peak in the deposit rate of the European Central Bank (ECB) at 4%, against 3.5% currently.

VALUES TO FOLLOW IN EUROPE:

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index fell 0.47% to 33,265.08 points and the broader Topix lost 0.12% to 2,303.65 points as the close approached.

If this trend is confirmed, it will be the second consecutive decline for the Nikkei which touched a new peak of more than 30 years on Monday. The Japanese market was penalized on Wednesday by profit taking and disappointment in sales of Fast Retailing (-2.68%), which contracted by 3.4% in June on a like-for-like basis.

The MSCI index comprising stocks from Asia and the Pacific (excluding Japan) fell by 0.7%.

In China, the Shanghai SSE Composite lost 0.62% and the CSI 300 lost 0.72%.

EXCHANGES/RATES

The dollar rose slightly (+0.11%) against a basket of benchmark currencies before the Fed’s “minutes”. Since the beginning of June, the greenback has been sailing in a narrow range between 102.75 and 103.75 points.

The euro is trading at $1.0868 (-0.08%) and the British pound at $1.2701 (-0.09%)

On the bond market, the yield on ten-year US Treasury bills is stable at 3.8546%.

OIL

The oil market is taking a breather on Wednesday after having benefited in the last two sessions from the announcements of a drop in production from Saudi Arabia and Russia from August. Black gold is also a victim of concerns about the economy.

Brent fell 0.55% to 75.83 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.62% to 70.92 dollars.

MAIN ECONOMIC INDICATORS ON THE JULY 5 AGENDA

COUNTRY GMT INDICATOR PERIOD PREVIOUS CONSENSUS

FR 06:45 Industrial production May -0.2% +0.8%

FR 06:50 S&P Global PMI 48.0 48.0

services (final)

S&P Global PMI 47.3 47.3

composite (final)

DE 06:55 S&P Global PMI for June 54.1 54.1

services (final)

S&P Global PMI 50.8 50.8

composite (final)

EZ 08:00 S&P Global June PMI 52.4 52.4

services (final)

S&P Global PMI 50.3 50.3

composite (final)

UK 08:30 S&P Global June PMI 53.7 53.7

services (final)

S&P Global PMI 52.8 52.8

composite (final)

EZ 09:00 May producer price -1.8% -3.2%

– over one year -1.3% +1.0%

(Written by Claude Chendjou, edited by Jean-Stéphane Brosse)

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