PARIS (Reuters) – Wall Street is expected to rise on Wednesday, while European stock markets advance to mid-session, reassured by poor PMI activity indicators. Futures on New York indices suggest an opening on Wall Street on the rise, with the Dow Jones gaining 0.30%, while the Standard & Poor’s 500 gained 0.39% and the Nasdaq 0.52%. In Paris, the CAC 40 rose by 0.29% to 7,261.63 points around 10:40 GMT, against 10% for the FTSE in London, and 0.37% for the Dax in Frankfurt. The pan-European FTSEurofirst 300 index rose 0.67%, against 0.33% for the EuroStoxx 50 and 0.53% for the Stoxx 600. PMI activity indicators confirmed the slowdown in manufacturing activity in euro zone, but it was the fall of the services activity indicator into contraction territory for the first time since January that relieved the markets on the trajectory of the European economy. In fact, activity in the services sector has so far continued to expand despite rate hikes by the European Central Bank (ECB), and was a source of inflationary pressures, through wages. The sector’s contraction therefore indicates that these pressures could subside over time, and that the ECB may not have to raise rates too significantly. “The emerging economic picture is worrying,” commented ING strategists. “We think tourism contributed positively to third quarter growth, but business surveys, like August’s PMI, show deteriorating activity that makes a recession believable.”

The markets are now divided on the outcome of the monetary policy meeting in September, with a hold of rates at their current levels being deemed likely at 50%. The annual meeting of the Federal Reserve in Jackson Hole, during which Christine Lagarde, the president of the ECB, must speak, will be closely followed by the markets. RATES Rates tumble in Europe after rising last week as slowing activity suggested by PMI indicators pushes investors to favor safe-haven assets, while falling services activity into contractionary territory pushes investors away the risks of a price-wage spiral. The German ten-year yield plunged 12 basis points to 2.536%, while that of the two-year rate fell 10.1 basis points to 2.995%. The ten-year Treasury yield fell 6.11 basis points to 4.2667%, compared to a decline of 3.4 basis points to 5.0032% for the two-year. VALUES TO FOLLOW ON WALL STREET NVIDIA is progressing before the opening, with investors positioning themselves ahead of the publication of the group’s results after the close. STOCKS TO WATCH IN EUROPE Roche posted one of the best performances of the Stoxx 600, up 5.14%, after announcing that it had been informed of the inadvertent disclosure of interim results of a clinical study concerning an experimental treatment with immunotherapy for lung cancer patients. The decline in oil prices weighed on the energy sector, which posted the worst sector performance of the Stoxx 600, down 0.88%. EXCHANGES The fall in risk appetite is favoring the dollar, while the poor PMI indicators are weighing on the euro. The dollar rose 0.35% against a basket of benchmark currencies, while the euro dropped 0.32% to 1.0809 dollars and the pound sterling 0.75% to 1.2634 dollars. OIL The poor PMI indicators are weighing on oil, with the markets worrying about the state of demand in the second half. Brent fell 1.31% to $82.93 a barrel, with US light crude (West Texas Intermediate, WTI) falling 1.36% to $78.56.

MORE ECONOMIC INDICATORS ON THE AGENDA FOR AUGUST 23

(Writing by Corentin Chapron, editing by Kate Entringer)

Copyright © 2023 Thomson Reuters