PARIS (Reuters) – European stock markets ended higher on Tuesday, reassured by signals showing the effects on the American economy of the Federal Reserve’s multiple interest rate hikes. In Paris, the CAC 40 gained 0.67% to 7,373.43 points, while the German Dax gained 0.88%. The British Footsie gained 1.72%. The EuroStoxx 50 index ended the session with an increase of 0.76%, against 1.0% for the FTSEurofirst 300 and 0.97% for the Stoxx 600. US consumer confidence deteriorated sharply in August, at a faster pace than expected by the consensus, while the short-term outlook for consumers has touched the level signaling that a recession is likely in one year. While consumption is the engine of the US economy, this unexpected fall reinforces the hypothesis of a slowdown in activity, which will probably be necessary to control inflation. Job openings in July in the United States are also down sharply from the previous month, an encouraging sign that the labor market is starting to slow down after being one of the main contributors to price dynamics in recent months. Investors are betting that these indicators will convince the Federal Reserve not to raise rates again at its September meeting, a positive scenario for risky assets. However, caution remains in order, with US inflation, expected on Thursday, and the Labor Department’s monthly report on Friday expected to confirm this scenario or not. VALUES Carrefour fell by 4.55%, showing the largest drop in the CAC 40, while the group’s CEO, Alexandre Bompard, warned of a drop in consumption in France, in particular of basic necessities due to the high prices. The basics and personal care sector was the worst performer on the Stoxx 600, falling 0.35%. NN Group gained 10.15%, leading the Stoxx 600, as the Dutch insurer reported on Tuesday an improvement in its solvency ratio in the first half. The basic resources sector posted the best performance of the Stoxx 600 (+2.12%), supported by the rise in copper prices on the prospect of supporting demand in China. Italy’s Treasury may take full control of Telecom Italia’s (TIM) submarine cable division, as part of a deal with US fund KKR to make a joint bid on the group’s fixed network, according to a draft government decree. Vivendi, which owns a roughly 24% stake in TIM, rose 1.63% in the wake of the announcement. A WALL STREET Wall Street advances after indicators signaling that the US economy is in a slowdown phase. At the time of closing in Europe, trading on the New York Stock Exchange indicated an increase of 0.56% for the Dow Jones, against 1.12% for the Standard & Poor’s 500 and an advance of 1.63%. for the Nasdaq Composite, made up of rate-sensitive growth stocks. RATES US yields fell sharply as data released on Tuesday raised hopes of a pause in rate hikes during the Fed’s next monetary policy meeting in September.

The ten-year Treasury yield fell 7.7 basis points to 4.1354%, while the two-year rate fell 11 bps to 4.9004%. At the close, the ten-year German yield was down 5.7 bp to 2.509%, while that of the two-year rate fell 2.2 bp to 3.032%. FOREIGN EXCHANGE The prospect of a pause in Fed rate hikes put pressure on the dollar, which fell 0.37% against a basket of benchmark currencies. The euro advanced 0.27% to 1.0846 dollars. The pound sterling nibbles 0.07% to 1.2612 dollars. OIL Crude recovers moderately, split between concerns over demand in the United States, which would decline in the event of a slowdown in activity, and fears over supply, as crude production off Florida could be interrupted by the passage of the storm Idalia. Brent crude was up 0.44% at $84.79 a barrel, with US light crude (West Texas Intermediate, WTI) rising 0.46% at $80.47.

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(Written by Corentin Chapron, edited by Bertrand Boucey)

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