by CORENTIN CHAPRON

PARIS (Reuters) – European stock markets are expected to decline sharply at the opening on Tuesday, while the latest American figures suggest that monetary policy will remain restrictive and that Chinese growth is unconvincing.

Futures contracts suggest an opening down 1.19% for the Parisian CAC 40, compared to 1.17% for the FTSE in London, 1.19% for the Dax in Frankfurt, and 1.48% for the EuroStoxx 50.

The indicators suggesting that the American economy is doing better than expected follow one another: retail sales surprised on the rise on Monday, after indicators the previous week suggesting that inflation remained high.

The surprise removes the prospects of a rate cut from the Federal Reserve, since the central bank can keep its rates at a restrictive level without tipping activity into recession.

Market operators are therefore repositioning themselves for more sustainable restrictive rates, a scenario which puts pressure on stocks and bonds.

The good figures for Chinese growth, which stood at 5.3% in the first quarter compared to 4.6% projected, are not enough to reassure the markets.

Growth was concentrated in the manufacturing sector, while retail sales were lower than expected and real estate activity contracted, removing the prospect of a shift towards the growth model based on consumption wanted by President Xi Jinping.

Geopolitics could finally regain importance this week, as Israel said it was preparing a “clear and decisive” response to Iran’s latest attack.

A WALL STREET

The New York Stock Exchange ended sharply lower on Monday as concerns over the Middle East and rising bond yields overshadowed strong US retail sales results in March.

The Dow Jones index fell 0.65%, or 248.13 points, to 37,735.11 points. The broader Standard & Poor’s 500 lost 61.59 points, or 1.20% to 5,061.82 points. The Nasdaq Composite fell 290.07 points (-1.79%) to 15,885.019.

Tesla lost 5.59% after announcing the layoff of more than 10% of its global workforce, according to an internal memo consulted by Reuters.

Apple fell 2.19% after data from research firm IDC showed the tech giant’s smartphone shipments fell around 10% in the first quarter of 2024.

IN ASIA

The Tokyo Stock Exchange fell in the wake of Wall Street. The Nikkei index lost 1.94% to 38,471.20 points and the broader Topix lost 2.04% to 2,696.95 points.

Technology stocks are falling. Tokyo Electron lost 3.84%, while Advantest lost 3.69%.

Chinese markets are falling, despite good GDP growth figures, with a set of indicators published on Tuesday suggesting that the recovery is starting to run out of steam. The Shanghai SSE Composite declined by 0.88%, the CSI 300 by 0.41%, the Hong Kong Hang Seng index by 1.78%.

RATE

US long yields are eroding after hitting their highest since November on Monday.

The ten-year Treasury yield fell 1.6 bps to 4.6118%, while the two-year rate was stable at 4.9295%.

The yield on the German ten-year rate is standing still at 2.441%, while that of the two-year rate is down 1.5 bp at 2.889%.

CHANGES

Markets are hesitant, with the yen remaining at its lowest level in 34 years against the dollar.

The Japanese currency fell 0.05% to 154.35 yen per dollar, while the Australian dollar lost 0.42% to 0.6414 dollars.

The dollar nibbles 0.08% against a basket of reference currencies, while the euro erodes by 0.12% to 1.0609 dollars, and the pound sterling by 0.2% to 1.2419 dollars.

OIL

Crude prices are rising after the Israeli Prime Minister convened his war cabinet on Monday to consider a response against Iran. Good growth figures in China, the world’s largest oil importer, also support prices.

The barrel of Brent rose 0.62% to $90.66 and that of American light crude (West Texas Intermediate, WTI) gained 0.66% to $85.97.

(Written by Corentin Chappron, edited by Zhifan Liu)

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