by Blandine Henault

PARIS (Reuters) – The main European stock markets are expected to rise on Tuesday at the opening despite persistent tensions in the bond market where the rate of ten-year US government bonds hit a peak since 2007.

Futures contracts signal an increase of 0.32% for the Parisian CAC 40, 0.56% for the Dax in Frankfurt, 0.14% for the FTSE in London and 0.47% for the Stoxx 600.

European indices are benefiting from the rise in technology stocks on Monday evening on Wall Street and from buying on the cheap after the decline of last week.

They could, however, be under pressure as sovereign bond yields climb on expectations of a longer-than-expected high interest rate environment.

The 10-year Treasuries rate hit a peak in Asian trading on Tuesday at 4.366%, surpassing its last peak in October to hit a 16-year high.

In this context, investors have their eyes riveted on the Federal Reserve symposium in Jackson Hole (Wyoming) where central bank president Jerome Powell is to speak at the end of the week.

Another potential source of stress on Tuesday for market operators, the agency S&P Global lowered the credit rating of several American banks, following a similar decision by its sister company Moody’s in early August.

RATE

After peaking earlier in Asian trading, the ten-year Treasuries yield is stabilizing at 4.346%.

In its wake, the yield on ten-year Japanese government bonds rose to its highest since 2014, at 0.671%.

In Europe, the German Bund rate of the same maturity remains at its highest since March, at 2.7%.

CHANGES

The dollar remains near a ten-week high against a basket of benchmark currencies, supported by the surge in US bond yields.

The yen, however, moved away from its lowest since November against the greenback after the announcement of discussions on Tuesday between the governor of the Bank of Japan, Kazuo Ueda, and Prime Minister Fumio Kishida. Those talks focused on economic developments, not recent exchange rate volatility, the central bank official said.

AT WALL STREET

The New York Stock Exchange ended in disarray on Monday, pending the Jackson Hole symposium and Nvidia’s results, which will be released on Wednesday.

The Dow Jones index fell 0.11% to 34,463.69 points. The broader S&P-500 gained 0.69% to 4,399.77 points.

The Nasdaq Composite advanced for its part by 1.56% to 13,497.59 points, carried by the jump of Nvidia (+ 8.2%) which benefited from an increase in the price target of HSBC to 780 dollars , the second highest amount on Wall Street.

Futures on the three indices, oriented earlier in the red, tend to erase their losses and now signal an opening on Tuesday at equilibrium.

IN ASIA

The Tokyo Stock Exchange gained 0.92%, driven by the rise in banking stocks with the rise in bond yields and by the advance in stocks linked to semiconductors in the wake of Nvidia.

In China, the trend is more mixed, with investors still worried about the health of the world’s second largest economy. The CSI 300 advances by 0.26% in a very volatile session while the Hang Seng of the Hong Kong Stock Exchange tries to rebound (+0.37%) after seven consecutive sessions in the red which brought it to a low nine months.

VALUES TO FOLLOW IN EUROPE:

European stocks linked to semiconductors could benefit from Nvidia’s jump on Monday evening on Wall Street, while banks are likely to be penalized by S&P’s downgrading of the rating of several American establishments.

OIL

Crude prices were down slightly on Tuesday, with concerns over Chinese demand still holding back despite the cut in supply.

The barrel of Brent from the North Sea fell 0.05% to 84.41 dollars and that of American light crude lost 0.1% to 80.65 dollars.

(Written by Blandine Hénault, edited by Tangi Salaün)

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