by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to fall on Thursday at the opening, the fears related to U.S. inflation and a possible continuation of the monetary tightening cycle of the Federal Reserve likely to dominate again in the absence of new catalysts.

According to the first indications available, the CAC 40 in Paris should lose 0.31% at the opening, the Dax in Frankfurt 0.38% and the FTSE 100 in London 0.37%. The EuroStoxx 50 index is expected to fall by 0.31%.

The markets were affected the day before by a resurgence of inflationary risk following the publication in the United States of the ISM services index which showed an acceleration in activity in August and a rise in prices inputs. Some economists regard the ISM sub-index of prices paid in services as a good leading indicator of personal consumption expenditure (PCE) inflation, the measure favored by the Fed in this regard.

In addition to this indicator, the surge in oil prices following the decision of Russia and Saudi Arabia to continue to cut their production also raises concerns about the persistence of inflationary pressures.

Pending monetary policy decisions next week from the European Central Bank (ECB) and then on September 20 from the Fed, equity markets could opt for caution, especially as bond yields are close to their peaks.

In the economic indicators of the day, investors await GDP data for the second quarter in the euro zone, while in the United States, the Fed’s Beige Book, which serves as a working basis for the monetary policy committee (FOMC) of the Fed, shows that US growth was “modest” in July and August and that the job market was “moderate”.

AT WALL STREET

The New York Stock Exchange ended lower on Wednesday amid concerns over persistent inflation and interest rates staying higher for longer than expected, while Apple’s pullback weighed on the tech compartment.

The Dow Jones index fell 0.57%, or 198.78 points, to 34,443.19 points.

The broader S&P-500 fell 31.35 points, or 0.70%, to 4,465.48 points.

The Nasdaq Composite fell for its part by 148.48 points (1.06%) to 13,872.47 points.

Nine of the eleven major sectors of the S&P-500 ended the session in the red, including technology, which recorded the largest decline (1.4%).

Apple fell 3.6% after reports that China has banned government agency officials from using overseas-produced iPhones and other devices for work.

Other high-growth stocks also retreated, with Tesla, Amazon and Nvidia losing between 1.6% and 3.8%, alongside rising ten-year and two-year US Treasury yields.

Lockheed Martin fell 4.8% after lowering its delivery forecast for its F-35 fighter jets.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index fell 0.75% to 32,991.08 points and the broader Topix fell 0.38% to 2,383.38 points at the close.

The MSCI index comprising stocks from Asia and the Pacific (excluding Japan) fell by 0.68%.

In China, the Shanghai SSE Composite lost 0.83% and the CSI 300 lost -1.06%.

On the economic indicator side, Chinese imports (-7.3%) and exports (-8.8%) fell in August, increasing the pressure on the manufacturing sector as domestic and external demand weakens.

CHANGES

The dollar is stable (-0.01%) against a basket of reference currencies after having approached the day before its peak since mid-March, at 105.03 points.

The Japanese currency, which is trading at a new ten-month low against the greenback, is trading at 147.49 yen per dollar.

The euro is virtually unchanged (-0.06%), at 1.0721 dollars, the lowest in three months.

RATE

The yield on ten-year U.S. Treasuries was flat on Thursday at 4.2897%, after climbing to 4.306%, a peak since Aug. 23.

While traders continue to largely expect a break in Fed rates in September, the outlook for November is more uncertain and none of them are betting on a cut before June 2024, according to the FedWatch barometer.

In the eurozone, the ten-year German Bund yield was almost unchanged, at 2.655%. On Wednesday, it hit a new two-week high, at 2.65%, after an ECB study showing a rise in consumer inflation expectations in the eurozone.

Money markets are now pricing with a probability of around 40% an ECB rate hike of 25 basis points on September 14 compared to a probability of around 20% a week ago.

OIL

The oil market is falling again due to concerns about Chinese demand in view of the weakness of the latest economic data: Brent fell 0.3% to 90.33 dollars a barrel and American light crude (West Texas Intermediate, WTI) 0.37% to $87.22.

(Written by Claude Chendjou, edited by Jean-Stéphane Brosse)

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