by Claude Chendjou

PARIS (Reuters) – European stock markets, excluding London, ended lower on Thursday and on Wall Street, indices attempted to rebound at mid-session despite the risk aversion that continues to dominate the day after a session of massive selling in the shares of the heavyweights of the American market.

In Paris, the CAC 40 ended down 1.15% at 7,427.02 points. The British Footsie, supported by Unilever (+6.23%) and the consumer sector (+3.0%), rebounded by 0.40%. The German Dax fell by 0.45%.

The EuroStoxx 50 index declined by 1.03% and the FTSEurofirst 300 by 0.72%. The Stoxx 600 ended down 0.72%, sinking to a 12-week low.

At the time of the European closing, the Dow Jones advanced by 0.87%, the Standard & Poor’s 500 by 0.43% and the Nasdaq by 0.07% while these last two indices recorded their worst session since 2022 on Wednesday.

Nvidia (-0.54%), Alphabet (-0.54%) and Microsoft (-1.56%) are still in the red, while Tesla rebounded by 2.88% after a 12% drop the day before.

The latest results from American giants have pushed investors to turn to so-called “value” stocks, with some judging the sector to be overvalued while most of the growth in major stock market indices since the start of the year has been based on the “tech” giants.

The Vix on Wall Street, dubbed the fear index, hit a three-month high of 19.36 points, while its European equivalent jumped 5.4% to 16.93 points on Thursday.

Risk aversion results in a flow into assets deemed safe, which drives up bond prices and, at the same time, lower yields.

“There are a multitude of factors at the moment, particularly what’s happening in the stock markets,” said Geoff Yu, a macroeconomic and currency strategist at BNY Mellon, citing a mix of declining car sales in the United States, Europe and Japan, as well as a surprise cut in short-term interest rates in China on Monday, as all factors that are raising concerns about a slowdown in global demand.

The publication in the afternoon of a statistic on the American economy which shows an acceleration of the growth of the GDP at an annualized rate in the second quarter to 2.8% (against 1.4% in the first quarter) associated with a slowdown of the PCE price index to 2.9% after 3.7% in the first quarter has partly reassured.

“The growth rate is higher than we’re looking for, but the good news is that the economy is growing as consumers spend more and inflation is coming down in the second quarter,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

The monthly PCE price index to be released on Friday will be particularly closely watched in this regard as the Fed meets next week and traders are still banking on a rate cut in September.

VALUES IN EUROPE

In luxury, Kering collapsed by 7.46%, the luxury group having reported a sharper than expected drop in its quarterly turnover and warned about its operating profit for the second half. Hermès, which will publish its half-year results after the market close, fell by 1.56%.

In new technologies, STMicroelectronics plunged 13.70% after its results while the sector index in Europe ended down 2.69%.

In the automotive sector, Stellantis fell by 8.69% after its results, while Renault (-7.48%) was weighed down by Nissan.

In the media, Vivendi (-6.09%) and Bolloré (-5.13%) were penalized by the difficulties of UMG (-21.6%).

In healthcare, Sanofi (+4.18%) and Roche (+1.46%) benefited from the increase in their forecasts, as did the British pharmaceutical group Indivior (+16.12%), which confirmed its annual outlook and announced a share buyback plan.

CHANGES

The dollar fell 0.11% against a basket of benchmark currencies as strong second-quarter GDP growth did not undermine expectations of a rate cut in September.

The euro is trading at 1.0859 dollars (+0.18%), while the pound sterling is down 0.21% at 1.2879 dollars.

The Japanese yen rallied for the fourth straight session against the dollar on Thursday, hitting a 2-1/2-month high of 151.95 per dollar. Rate futures are pricing in a 67.2% chance that the Bank of Japan (BoJ) will raise rates next week, up from about 40% earlier this week, according to LSEG.

RATE

The yield on the 10-year German Bund ended down around three basis points (bps) at 2.419%, while the two-year British Gilt fell to its lowest level since May 2023 on Thursday as expectations of a rate cut in Britain on August 1 strengthened.

The rate on ten-year US Treasury bonds fell 5.3 basis points (bps) to 4.2329%.

OIL

The oil market is moving in a disjointed manner following the gloomy outlook for Chinese demand: Brent is down 0.04% to $81.68 per barrel, but light American crude (West Texas Intermediate, WTI) is up 0.21% to $77.8.

TO BE CONTINUED FRIDAY:

(Written by Claude Chendjou, edited by Sophie Louet)

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