by Claude Chendjou

PARIS (Reuters) – European stock markets ended lower on Tuesday as political risk in France weighed on investors, while on Wall Street, where indices were mixed, investors digested comments on interest rates from Federal Reserve Chairman Jerome Powell in a volatile session.

In Paris, the CAC 40 ended down 0.30% at 7,538.29 points. The British Footsie fell 0.56% and the German Dax lost 0.75%.

The EuroStoxx 50 index fell by 0.50%, the FTSEurofirst 300 by 0.46% and the Stoxx 600 by 0.44%.

At the time of the European closing, the Dow Jones lost 0.06%, but the Standard & Poor’s 500 gained 0.07%, while the Nasdaq advanced 0.22% in an indecisive session marked in particular by profit-taking.

Tesla, which reported a less-than-expected year-on-year decline in vehicle deliveries in the second quarter, stood out with a gain of 8.65%, which supported Wall Street.

In Europe, after the brief relief on Monday, linked to the results of the first round of the French legislative elections which removed the prospect of the left-wing alliance coming to power, the market has started to fall again while the risk premium on French debt remains high.

The National Rally (RN), which came out on top in the first round of the legislative elections, was trying on Tuesday, before the deadline for submitting candidacies for the second round, to convince the French to grant it an absolute majority in the National Assembly, while the other parties were mobilizing to avoid three-way contests.

On financial markets, the spread between ten-year German and French bonds has widened, while analysts agree that it will remain high at least until Sunday.

At the same time, the session was marked by the publication of numerous macroeconomic indicators and interventions by central bankers within the framework of a conference on monetary policy organized in Sintra, Portugal.

In the eurozone, inflation slowed as expected, to 2.5% over a year in June, while the unemployment rate remained stable at 6.4%. These unsurprising data did not argue for an accelerated rate cut by the European Central Bank (ECB).

In Sintra, however, ECB President Christine Lagarde stressed that the disinflation process in the eurozone was “very advanced”, while her counterpart at the US Federal Reserve (Fed), Jerome Powell, said that more data would be needed before reducing interest rates. The market awaits the publication of the official monthly report on US employment on Friday, while the Jolts survey on job openings in May showed a stronger than expected increase.

VALUES IN EUROPE

Sodexo fell 4.72% after reporting slightly lower-than-expected third-quarter revenue.

Teleperformance rose 4.13% after Morgan Stanley raised its recommendation on the group.

Richemont (+0.39%) finished in the green after the appointment of Louis Ferla as CEO of Cartier.

Sainsbury’s fell 2.87% as the retailer reported a decline in first-quarter non-food sales on Tuesday amid poor weather conditions.

Siemens Energy gained 3.77% after the energy engineering group announced it would recruit more than 10,000 employees by 2030.

HelloFresh jumped 7.73% as JPMorgan removed the meal kit delivery specialist from its “Negative Catalyst Watch.”

CHANGES

The dollar depreciated on Tuesday, by 0.05%, against a basket of reference currencies, with Jerome Powell’s comments on the economy being interpreted as accommodative. Karl Schamotta, market strategist at Corpay, even believes that the Fed boss has put a rate cut on the table in September. The euro fell by 0.04%, to 1.0734 dollars, while the pound sterling was trading at 1.26755 dollars (+0.19%).

RATE

The yield on 10-year US Treasury bonds, which rose nearly 14 basis points on Monday, fell 3.4 basis points on Tuesday to 4.4435% after Jerome Powell’s comments.

The yield on the ten-year German Bund ended virtually stable at 2.602%, as did that of the French OAT of the same maturity, which stood at 3.316%. The spread between these two bonds, however, rose during the session to 76.8 basis points.

OIL

Oil prices remain near a two-month high on expectations of increased demand during the summer season and possible supply disruptions from Hurricane Beryl.

Brent gained 0.14% to $86.72 per barrel and light American crude (West Texas Intermediate, WTI) advanced 0.06% to $83.33.

(Written by Claude Chendjou, edited by Blandine Hénault)

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