(Reuters) – The main European stock markets are expected to fall at the opening on Wednesday despite a rebound in bonds which offers respite to risky assets, with investors remaining cautious before the publication of numerous indicators. The first available indications indicate that the Parisian CAC 40 would decline by 0.57% at opening. Futures contracts on the FTSE in London suggest a decline at the opening of 0.21%, compared to 0.18% for the Dax in Frankfurt, and 0.52% for the EuroStoxx 50.

Bond yields continue to fall, supported by dovish comments from Federal Reserve officials suggesting that the terminal rate has already been reached.

“I don’t think we need to raise rates any further,” Raphael Bostic, president of the Atlanta Fed, told the American Bankers Association on Tuesday, echoing similar statements from two other officials on Monday. While markets were expecting at least one additional rate hike by the end of the year following the September monetary policy meeting, the vast majority of traders expect the Fed keeps its rates unchanged for the last two meetings of this year, according to the FedWatch tool.

Caution remains, however, with important data on inflation and producer prices expected this week, as well as the minutes of the September Fed meeting and the start of earnings season.

The latest labor market figures were surprising in their strength, and an upward surprise on inflation or producer prices could revive fears of a new rate hike. The evolution of the fighting in the Middle East also remains a source of potential volatility, particularly in the event of an extension of the conflict.

VALUES TO FOLLOW:

A WALL STREET

The New York Stock Exchange ended higher on Tuesday, as conciliatory comments from Fed officials caused a decline in bond yields and reassured investors, who were closely monitoring the situation in the Middle East.

The Dow Jones index gained 0.40%, or 134.65 points, to 33,739.30 points. The broader S&P-500 gained 22.58 points, or 0.52%, to 4,358.24 points. The Nasdaq Composite advanced 78.61 points (0.58%) to 13,562.84 points.

IN ASIA

Japanese markets are hesitant, with the Nikkei more exposed to tech progressing thanks to semiconductor-related stocks which benefit from accommodating comments from the Fed. The Nikkei rose 0.49% to 31,902.24 points, while the Topix was stable at 2,314.24 points.

Lasertech, Advantest, and Tokyo Electron posted the best performances in the index, up 7.18%, 2.18% and 2.19% respectively.

Chinese indices are advancing, driven by the Fed and information from a local media which mentions new measures to support the economy. The Shanghai SSE Composite lost 0.17%, the CSI 300 0.35%. The Hong Kong Hang Seng index gained 1.38%.

CHANGES

The foreign exchange markets are calm in a wait-and-see environment.

The dollar is standing still against a basket of reference currencies, while the euro remains at $1.0603, and the pound sterling at $1.229.

In Asia, the yen lost 0.09% to 148.84 yen per dollar, while the Australian dollar fell 0.2% to 0.6418 dollars.

RATE

Yields on US securities continue to decline after encouraging comments from the Fed. The ten-year Treasury yield fell 1.2 bps to 4.6428%, losing 16 bps since its 16-year high reached four sessions ago, while the two-year rate rose 1.7 bps to 5.0011%.

OIL

Oil is rising, with fears of an impact of the Israeli-Palestinian conflict on oil supply remaining persistent.

Brent rose 0.32% to $87.93 per barrel, with American light crude (West Texas Intermediate, WTI) gaining 0.27% to $86.2.

(Written by Corentin Chappron, edited by Jean-Stéphane Brosse)

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