by Claude Chendjou

The main European stock markets are expected to fall on Friday in a context of a rise in American bond yields, reinforced by a warning the day before from the President of the American Federal Reserve (Fed) Jerome Powell, while geopolitical risk and results publications mixed results of companies keep investor morale at half mast.

According to the first available indications, the Parisian CAC 40 should lose 0.74% at the opening, the Dax in Frankfurt 0.61% and the FTSE 100 in London 0.45%. The EuroStoxx 50 index is expected to fall by 0.76% while the Stoxx 600 fell by more than 1% the day before, to a two-week low, with investors focusing on the situation in the Middle East.

Israeli Defense Minister Yoav Gallant told soldiers gathered at the Gaza Strip border on Thursday that they would soon see the Palestinian enclave “from within,” hinting that a ground offensive targeting Hamas could be imminent.

In a prime time televised address from the Oval Office, US President Joe Biden said the world was facing a “turning point” in history.

On the economic front, the recent tensions on the American bond markets are expected to continue as Jerome Powell declared Thursday, during a speech at the Economic Club of New York, that the strength of the economy could require further increases in rate, two weeks before the next meeting of the American central bank. Over the week as a whole, the yield on ten-year Treasury bills rose 35 basis points, its largest weekly increase in more than ten years.

In today’s indicators, the market will watch retail sales in the United Kingdom and producer prices in Germany as the Bank of England (BoE) holds its monetary policy meeting on November 2 and the European Central Bank ( BCE) his on October 26.

A WALL STREET

The New York Stock Exchange ended Thursday down, weighed down by the prospect of new rate hikes mentioned by Jerome Powell and by the fall of Tesla after the publication of its quarterly results.

The Dow Jones index fell 0.75%, or 250.91 points, to 33,414.17 points.

The broader S&P-500 lost 36.61 points, or 0.85%, to 4,277.99 points.

The Nasdaq Composite fell 128.13 points (-0.96%) to 13,186.18 points.

The Fed President’s statements have reinforced fears of a prolonged maintenance of rates at a high level in the United States.

With quarterly corporate earnings season in full swing, Tesla shares fell 9.3% as the electric vehicle maker reported gross margin, profit and earnings on Wednesday evening. business below Wall Street forecasts. Its CEO Elon Musk further expressed concern about the impact of rising interest rates on demand for its cars.

Netflix shares, on the other hand, jumped 16.06%, as the video-on-demand platform announced that it had acquired nine million additional subscribers in the third quarter.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index fell 0.27% to 31,346.52 points, while the broader Topix lost 0.16% to 2,260.61 points as the close approached. Over the week as a whole, the Nikkei lost 3.6%.

The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) lost 0.80%, to a new low of November 2022, which brings its weekly decline to 3%.

In China, the Shanghai SSE Composite fell by 0.55% and the CSI 300 lost 0.57%.

VALUES TO FOLLOW IN EUROPE:

CHANGES

The dollar gained 0.04% against a basket of reference currencies but should post a slight loss over the week as a whole, while remaining close to its peak of the year reached at 107.34 points on October 3.

The euro is stable (-0.03%), at 1.0576 dollars, while the pound sterling stands at 1.2136 dollars (-0.06%).

RATE

On the bond market, the yield on ten-year US Treasury bonds fell by around four basis points, to 4.9414%, after having climbed during the session the day before to a new 16-year peak, briefly exceeding the threshold 5% for the first time since 2007. In his speech to the Economic Club of New York, Jerome Powell also stressed that the central bank would “act with caution” in terms of increasing the cost of credit.

In Japan, the Bank of Japan (BoJ) intervened in the bond market on Friday as the yield on ten-year JGBs hit a ten-year high in early trading, driven by rising US Treasury rates.

The yield on 10-year Japanese bonds rose to 0.845%, its highest level since July 2013.

OIL

The oil market is heading towards a second consecutive week of gains on fears of an escalation of the conflict between Israel and Hamas which could have repercussions on the supply of crude.

Brent rose 1.03% to $93.33 per barrel and American light crude (West Texas Intermediate, WTI) rose 1.17% to $90.42.

GOLD

Gold, the ultimate safe haven, gained 0.23% to $1,978.33 per ounce, after hitting a peak since the end of July, at $1,982.09.

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

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