by CORENTIN CHAPPRON
PARIS (Reuters) – Wall Street is expected to decline on Tuesday, while European stock markets fell at midday, weighed down in particular by the decline in banks after the announcement of an exceptional tax in Italy on the profits of the sector and the downgrading by Moody’s of the rating of several American banking establishments.
Poor Chinese foreign trade data for July is also weighing on market sentiment as investors await the release of key inflation indicators from China (Wednesday) and the US (Thursday).
New York index futures suggest a lower Wall Street opening, with the Dow Jones yielding 0.53, while the Standard & Poor’s 500 fell 0.53% and the Nasdaq 0.52%.
In Paris, the CAC 40 dropped 0.88% to 7,255.36 around 10:42 GMT, against a drop of 0.55% for the FTSE in London and 1.09% for the Dax in Frankfurt.
The pan-European FTSEurofirst 300 index sank 0.51%, the EuroStoxx 50 lost 1.34% and the Stoxx 600 fell 0.52%.
Chinese trade data released on Tuesday showed both imports and exports fell much faster than expected in July, a signal that raised concerns about the state of the world’s second-largest economy.
“China’s trade surplus increased surprisingly from $70.62 billion in July to $80.6 billion in July, but it was the balance between imports and exports that alerted markets to the state of domestic demand”, explains Kenneth Broux, head of corporate research at Societe Generale CIB.
Imports are down 12.4% in July, against a decline of 5.6% forecast by the consensus.
Moody’s has also sent a warning signal on the health of the US banking sector by lowering the credit rating of several medium-sized banks. The rating agency has warned that it could downgrade that of larger institutions.
Another unpleasant surprise was the unexpected announcement by the Italian government of the introduction of an exceptional tax on bank profits.
These two announcements bring down the banking sector in Europe, while US banking stocks are expected to fall on Wall Street.
THE VALUES TO FOLLOW IN WALL STREET
In pre-market, Bank of America, Citigroup and Goldman Sachs fell between 0.6% and 0.8% after the warning from Moody’s. US-listed shares of Chinese companies fell for their share after disappointing July trade data.
VALUES IN EUROPE
The exceptional tax on banks in Italy and the downgrading by Moody’s of the rating of several American banks is weighing on the European banking sector, which fell by 2.8%, the largest sectoral drop in Europe.
In Paris, Crédit Agricole lost 2.88%, BNP Paribas dropped 3.14% and Société Générale lost 1.80%. The sanction is even greater on Italian banks, Intesa Sanpaolo plunging 7.83%.
Abrn is at the bottom of the Stoxx 600, down 9.519% after reporting a drop in assets under management linked to market volatility in the first half.
For its part, Novo Nordisk soars by 10.74%, the group having announced that its drug Wegovy reduced the risk of cardiovascular accidents by 20%.
RATE
Government bond yields are down sharply on both sides of the Atlantic amid weak and wait-and-see market sentiment ahead of Thursday’s release of US inflation data that could confirm the US rate hike cycle Fed is coming to an end.
In Europe, the consumer confidence survey published by the European Central Bank shows a clear deterioration, which is fueling the risk aversion movement.
The German ten-year yield fell 12.9 bp to 2.432% and that of the two-year rate fell 7.7 bp to 3.072%.
The ten-year Treasury yield fell 7.8bp to 3.9999%, its lowest in a week, against a decline of 2.5bp to 4.7325% for the two-year.
CHANGES
In a context of caution, the dollar strengthened by 0.47% against a basket of reference currencies. The euro dropped 0.43% to 1.0955 dollars, after the publication of the ECB survey, while the pound sterling fell 0.52% to 1.2718 dollars.
OIL
Poor Chinese indicators fuel concerns about global demand and weigh on oil prices.
Brent fell 1.79% to $83.81 a barrel and US light crude (West Texas Intermediate, WTI) fell 1.73% to $80.52 a barrel.
NO MORE MAJOR ECONOMIC INDICATOR ON THE AGENDA
(Report Corentin Chapron, edited by Blandine Hénault)
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