by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to rise on Monday at the start of a week which should be marked by the first reduction in key rates from the European Central Bank (ECB) and perhaps also that of the Bank of Canada (BoC), while today’s session will be dominated by the publication of manufacturing PMIs in Europe.

According to the first available indications, the Parisian CAC 40 should gain 0.85% at opening. The Dax in Frankfurt could advance by 0.98%, while the FTSE 100 in London should gain 0.80%. The EuroStoxx 50 index is expected to increase by 1.04%.

The market will learn a little before 08:00 GMT of the final figures for manufacturing activity in May in the main European countries while the preliminary indicator showed that activity in the sector in the euro zone had reached its highest level in 15 month at 47.4, after 45.7 in April.

If this figure is confirmed, it should reassure investors who fear a decline in the European economy compared to the United States.

It is in this context that the ECB should, according to a consensus widely shared by economists and markets, lower its key rates by 25 basis points on Thursday while inflation in the monetary bloc stood at 2.6 % last month.

However, uncertainty remains over the trajectory of ECB rates beyond June, while that of the American Federal Reserve (Fed) is even more vague, a reduction in borrowing costs in the United States not being expected before November.

The Bank of Canada is expected to announce its monetary policy decision on Wednesday and the Reuters survey predicts that its main key rate will increase to 4.75%.

A WALL STREET

The New York Stock Exchange ended up rather reassured on Friday by the latest inflation figures in the United States.

The Dow Jones ended the week on a positive note, with an increase of 1.51% to 38,686.32 points. The S&P gained 0.85% to 5,280.01 points. Only the Nasdaq finished stable (-0.01%) at 16,735.015.

The major indicator of the day, the PCE inflation index, rose by 0.3% over one month in April, and by 2.7% over one year, figures in line with expectations although unlikely to clarify upcoming decisions by the American central bank.

Dell plunged nearly 18% after announcing a lower-than-expected quarterly profit forecast, while Gap jumped 28.6% after revising its annual outlook upwards.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index advanced 1.11% to 38,916.15 points. The broader Topix took 0.92% to 2,797.9 points.

In terms of indicators, Japanese factory activity increased in May for the first time in a year, while that in South Korea grew at the fastest pace in two years, PMIs show.

The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) rebounded by 1.4% after a drop of 2.5% last week.

In China, the Shanghai SSE Composite rose 0.53% and the CSI 300 rose 0.03%, while manufacturing activity accelerated in May to a two-year peak, according to a private survey published by Caixin .

VALUES TO FOLLOW IN EUROPE:

EXCHANGES/RATES

The dollar is practically stable (+0.03%) against a basket of reference currencies while the greenback recorded its first monthly decline in May since the start of the year, weighed down by uncertainties over the evolution of Fed rates.

The euro is trading at $1.085 (+0.04%) and the pound sterling is trading at $1.2738 (-0.01%).

The yield on ten-year US Treasury bonds fell by 2.5 basis points to 4.4867%.

Markets currently expect the Fed to cut rates by 37 basis points by the end of the year.

OIL

The oil market is in slight decline despite the decision of OPEC+ to extend its production cuts until 2025: Brent fell by 0.14% to 81.00 dollars per barrel and American light crude (West Texas Intermediate, WTI) by 0.1% to $76.91.

According to several analysts, including those from Goldman Sachs, investors are currently digesting the OPEC+ decision.

(Written by Claude Chendjou, edited by Blandine Hénault)

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