by Claude Chendjou

PARIS (Reuters) – The main European stock markets ended in the green on Monday against a backdrop of calm in the bond sector, after tensions on rates last week linked to doubts about the expected pace of reduction in central bank rates .

In Paris, the CAC 40 ended with a gain of 0.46% to 8,132.49 points. The German Dax gained 0.37%.

The EuroStoxx 50 index advanced by 0.37%, the FTSEurofirst 300 by 0.27% and the Stoxx 600 by 0.28%.

The gains in Europe, led by the energy (+0.95%) and “utilities” (+1.1%) compartments, were however limited due to the long weekend on the stock markets in London and New York due to public holidays.

The bond market opted for relaxation, which logically benefited stocks, after several officials of the European Central Bank (ECB), including Philip Lane and François Villeroy de Galhau, spoke of reductions in key rates.

The ECB meets on June 6 and, according to observers, should lower its borrowing costs by 25 basis points, for the first time in the current cycle of monetary tightening that began in July 2022.

Philip Lane stressed, however, that this did not mean inflation had been overcome, and that policy should still remain restrictive until 2025.

Before the ECB meeting, the market will learn on Friday the first estimate of consumer prices in the euro zone for the month of May and the PCE price index in April in the United States, two highly anticipated statistics, likely to influence the trend.

“Our economists broadly agree with the consensus that headline inflation (in the euro zone) should increase while the decline in underlying inflation should stop,” warns Hauke ​​Siemssen, rates strategist at Commerzbank.

“This result could add spice to the ECB’s assessment that the dynamics of headline and core inflation are decelerating,” he added.

RATE

The yield on the ten-year German Bund ended down almost four basis points, at 2.548%. The two-year, more sensitive to forecasts on key rates, fell at the close by more than five points, to 3.039%, and during the session to a low at 3.027%. It reached its highest level since mid-November on Friday at 3.124%.

Money markets are currently counting on cumulative rate cuts of 60 basis points in the euro zone by the end of the year, which implies a little more than two reductions in the cost of money.

CHANGES

Before the publication of data on US inflation, the dollar fell by 0.15% against a basket of reference currencies and was heading towards a loss of 1.5% over the whole month, the sharpest since December.

The euro, which gained 0.9% against the note last week, rose 0.11% to $1.0857. BofA economists say they expect divergences between the monetary policies of the ECB and the US Federal Reserve (Fed) to widen and the spread between US and German yields to exceed current peaks by end of the year.

The pound sterling is trading at 1.2773 dollars (+0.26%).

VALUES IN EUROPE

Alstom jumped 5.56% following the announcement of the launch of a capital increase of one billion euros which should allow it to straighten out its finances.

Stellantis advanced 1.38% as the car manufacturer should soon commit to increasing its annual vehicle production in Italy to one million units.

Temenos gained 1.13% as activist investor Petrus Advisers increased its stake in the Swiss banking software group from 3.4% to more than 5%.

EFG International gained 0.98% and Julius Baer lost 1.54%, with sources reporting discussions between the two groups with a view to a possible acquisition of the first by the second, even if the negotiations are now interrupted .

Webuild rose 3.96% after the managing director of the Italian construction group Pietro Salini said he anticipated results for the first half and 2024 better than expected on Friday, according to the ANSA news agency.

MAIN INDICATOR OF THE DAY

The morale of German entrepreneurs stagnated in May, contrary to expectations, with an Ifo index at 89.3 after an identical (revised) figure in April and after three consecutive months of increase.

OIL

Oil prices are recovering in a sluggish context with the closures of financial markets in London and New York and before the June 2 OPEC meeting.

Brent, which lost around 2% last week after the publication of the minutes of the last meeting of the American Federal Reserve (Fed), rose 1.12% on Monday to 83.04 dollars per barrel.

American light crude (West Texas Intermediate, WTI) rose 1.24% to $78.68.

(Written by Claude Chendjou, edited by Blandine Hénault)

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