PARIS (Reuters) – The main European stock markets are expected to rise at the opening on Tuesday, with investors revising their outlook for a rate cut by the Federal Reserve while China strengthens its measures to support its markets.

According to the first available indications, the Parisian CAC 40 is up 0.33% at the opening. Futures contracts suggest an opening advance of 0.33% for the FTSE in London, 0.29% for the Dax in Frankfurt and 0.43% for the EuroStoxx 50.

While few important data are expected this week, investors remain focused on the trajectory of US rates.

On Monday, the ISM services indicator, stronger than expected, revived fears of more persistent inflation than expected while the tertiary sector now represents the main factor in price increases.

This indicator follows a monthly employment report, published Friday, which was much stronger than expected by economists.

Market operators now believe that the first rate cut by the American central bank will take place in May, and no longer March, while Federal Reserve Chairman Jerome Powell warned on Sunday that he would need more information on the slowdown in inflation to consider rate cuts.

China is also strengthening its efforts to support its domestic markets, with a state-owned investment fund having notably announced an increase in its capital injections into local assets.

Also helping to liven up markets, the Australian Central Bank (RBA) kept rates at their current levels on Tuesday, while the RBA’s decisions are sometimes seen as a leading indicator of decisions by other Western central banks.

A WALL STREET

The New York Stock Exchange ended lower on Monday, the day after Fed Chairman Jerome Powell’s statements indicating that more evidence of a lasting downward trend in inflation would be needed to justify a reduction in key rates.

The Dow Jones index lost 0.71%, or 274.30 points, to 38,380.12 points. The broader Standard & Poor’s 500 lost 15.80 points, or 0.32% to 4,942.81 points. The Nasdaq Composite fell 31.28 points (0.20%) to 15,597.677.

In stocks, Nvidia reached a new high on Monday after Goldman Sachs raised its price target on the semiconductor manufacturer against a backdrop of the boom in artificial intelligence (AI).

IN ASIA

The Tokyo Stock Exchange ended lower on Tuesday, as the high level of stock markets encouraged investors to take profits. The Nikkei index lost 0.53% to 36,160.66 points and the broader Topix lost 0.67% to 2,539.54 points.

Toyota Motor gained 4.78% after publishing better than expected third quarter results.

Chinese markets are rebounding after a state-run fund said it was increasing its capital injections into domestic markets, while the state insisted it would limit short selling. The Shanghai SSE Composite jumped 2.92%, the CSI 300 3.06% and the Hong Kong Hang Seng index 3.76%.

RATE

US yields are consolidating after jumping 29 basis points over the last two sessions, with markets worried about the outlook for US rates.

The ten-year Treasury yield fell 4.1 basis points to 4.1231%, while the two-year rate fell 3.9 bps to 4.4327%.

CHANGES

The Australian dollar is strengthening after Australia’s central bank decided on Tuesday to keep rates at a restrictive level.

The dollar declined by 0.1% against a basket of reference currencies, while the euro gained 0.07% to 1.0749 dollars and the pound sterling 0.13% to 1.2548 dollars.

In Asia, the yen strengthened by 0.19% to 148.39 yen per dollar, while the Australian dollar gained 0.4% to 0.6508 dollars.

OIL

Crude markets are hesitant after the visit of American Secretary of State Anthony Blinken on Monday to Saudi Arabia, which raises hopes of an easing of geopolitical tensions.

Brent advanced 0.1% to $78.07 per barrel, American light crude (West Texas Intermediate, WTI) was stable at $72.83.

(Written by Corentin Chappron, edited by Bertrand Boucey)

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