by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to fall on Monday at the opening after the publication of mixed Chinese economic indicators which dampen the hope of fiscal stimulus measures by Beijing.

According to the first indications available, the CAC 40 in Paris should lose 0.48% at the opening, the Dax in Frankfurt 0.39% and the FTSE 100 in London 0.44%. The EuroStoxx 50 index is expected down 0.59%.

China’s gross domestic product rose 0.8% in the second quarter, above the 0.5% forecast, but year-on-year growth slowed to 6.3%, far from the expected 7.3%, show the official data released on Monday.

As for industrial production, it came out over one year in June at +4.4%, against +2.7% expected, while growth in retail sales decelerated over one year to 3.1% after +12 .7% in May.

“The data suggests that China’s post-COVID boom is clearly over. Major indicators are up from May’s figures, but still paint a grim and breathless recovery, while youth unemployment hits highs. record highs,” said Carol Kong, an economist at CBA.

“Markets have already adjusted their (economic stimulus) forecasts down, and our base case is that there will be no substantial action,” she added.

In addition, the kick-off of the earnings season in the United States, given Friday by the big banks of Wall Street, left investors on their hunger, despite the strong profits posted in the second quarter by JPMorgan Chase and Wells Fargo . Goldman Sachs’ financial accounts are due Wednesday.

Analysts said the market opted for caution as the Stoxx 600 gained 3.05% last week, its best performance since the end of March.

Refinitiv data shows that second-quarter earnings for S&P-500 companies are expected to fall 6.4% year-on-year.

In terms of macroeconomic indicators in the United States, the market is notably awaiting the publication of retail sales for June on Tuesday, which could provide indications on the evolution of the economy while the American Federal Reserve (Fed) meets next week.

Traders are currently pricing in a 96% chance of a final Fed rate hike to 5.25%-5.5% after confirmation last week of slowing inflationary pressures

AT WALL STREET

The New York Stock Exchange ended in disarray on Friday on profit taking and after mixed forecasts from major US banks.

The Dow Jones Industrial Average gained 0.33%, or 113.89 points, to 34,509.03 points.

The broader S&P-500 fell 4.62 points, or 0.10%, to 4,505.42 points.

The Nasdaq Composite fell for its part by 24.87 points (-0.18%) to 14,113.70 points.

“What we are seeing today, and which should continue through the end of the summer, is a bit of fatigue and a lack of conviction around the idea that stocks can rise significantly,” said Oliver Pursche, Vice Chairman of Wealthspire Advisors.

JP Morgan Chase and Wells Fargo ended flat after reporting higher quarterly profits, but said they had booked provisions to deal with potential commercial real estate loan losses.

IN ASIA

The Tokyo Stock Exchange, which ended Friday down 0.09%, remained closed on Monday due to a public holiday in Japan.

The MSCI index comprising stocks from Asia and the Pacific (excluding Japan) fell 0.2% after a gain of 5.6% last week.

In China, the Shanghai SSE Composite dropped 1.16% and the CSI 300 lost 1.06%.

CHANGES

The dollar was virtually unchanged (-0.01%) against a basket of benchmark currencies after posting its biggest weekly drop (-2.2%) since the start of the year last week.

The euro, which jumped 2.4% last week to a 16-month high, was virtually stable at $1.1224 (-0.03%).

RATE

On the bond market, the yield on ten-year US Treasury bonds is practically unchanged, at 3.8145%, and that of two years is at 4.772% (+2.1 basis points). The latter fell 18 basis points last week as the market now expects a 110 basis point cut in Fed rates next year, starting in March.

OIL

Oil prices are affected by data from China and the resumption of production in Libya over the weekend after the disruptions on Thursday.

Brent lost 0.95% to 79.11 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.97% to 74.69 dollars.

(Written by Claude Chendjou)

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