by Diana Mandia

(Reuters) – The main European stock markets ended lower on Wednesday after moving on small variations while the day is a public holiday in the United States and attention turns to central bank meetings.

In Paris, the CAC 40 lost 0.77% to 7,570.20 points and in Frankfurt, the Dax fell 0.36%. The London FTSE 100, on the other hand, gained 0.17%.

The EuroStoxx 50 index ended down 0.61%, the FTSEurofirst 300 by 0.15% and the Stoxx 600 by 0.18%.

The session was calm on Wednesday in the absence of trading on the New York Stock Exchange, closed for the commemoration of the abolition of slavery in 1865, which limited trading volumes on open financial markets.

Markets are also turning to central banks, with the Bank of England (BoE), Norges Bank and the Swiss National Bank (SNB) all due to announce their monetary policy decisions on Thursday.

In the UK, the BoE is expected to welcome the return of inflation to its 2% target in May, a first in almost three years, even if underlying price pressures persist and markets do not Don’t expect rates to ease before September or October.

In France, investors continue to assess the risks to the public finances of a far-right government following the early legislative elections. If the yield gap between German and French 10-year bonds has narrowed in recent days, it should remain under pressure until the electoral meeting.

The European Commission also announced on Wednesday the opening of a procedure for excessive public deficits against seven countries of the bloc, including France, whose deficit reached 5.5% of GDP in 2023.

While this decision is far from being a surprise, it could attract “significant” attention, given the fragility of sentiment in France, notes Piet Haines Christiansen, analyst at Danske Bank.

VALUES

In Paris, Dassault Systemes SE lost 3.09%, bottom of the CAC 40, Exane BNP Paribas having lowered its recommendation to “underperformance” from “neutral”.

The banks Société Générale, Crédit Agricole SA and BNP Paribas fell between 0.6% and 1.6%, underperforming the European compartment, which gained 0.25%.

Despite the uncertainty in France, Barclays analysts nevertheless maintained their positive opinion on European banks on Wednesday.

German solar energy components group SMA Solar Technology AG, which issued a warning on its annual profit, dropped 31%,

CHANGES

The foreign exchange market is rather stable as the stock markets close in Europe.

The dollar lost 0.05% against a basket of reference currencies and the euro gained 0.08% to 1.0747 dollars.

The European currency remains near recent lows on concerns that a possible new government in France could weaken fiscal discipline and push up debt risk premia in the euro zone.

The pound sterling gained ground (+0.09%) against the dollar, after data showed that services inflation in the United Kingdom was stronger than expected in May.

RATE

Euro zone bond yields rose on Wednesday, while the risk premium demanded by investors to hold French bonds remained stable after last week’s turmoil.

The ten-year German Bund yield rose 1.3 basis points to 2.4060%, while the ten-year OAT rose 3.6 points to 3.1558%.

The gap between the 10-year yields of France and Germany stands at 74 basis points, up 2 bps compared to Tuesday, but below the more than 80 bps reached last week.

OIL

Oil prices are steady after hitting a seven-week high on Wednesday, as optimism over summer demand and concerns over escalating conflict in the Middle East offset an industry report showing that US crude stocks rose unexpectedly.

Brent fell 0.14% to $85.21 per barrel and American light crude (West Texas Intermediate, WTI) lost 0.17% to $81.43.

TO BE CONTINUED THURSDAY:

The Bank of England will announce its monetary policy decision at 1 p.m.

Stocks to follow on the Paris Stock Exchange and in Europe [WATCH/LFR]

(Written by Diana Mandiá, edited by Blandine Hénault)

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