by Pauline Foret

PARIS (Reuters) – Major European stock markets are expected to open hesitantly on Friday, as signs mount that a rate cut is coming in both the United States and the euro zone and global markets eagerly await Jerome Powell’s speech at the Jackson Hole symposium.

According to the first available indications, the Parisian CAC 40 could open stable, gaining 0.04%.

Futures are also signaling a stable opening, slightly up 0.04%, for the Dax in Frankfurt, while the FTSE in London is seen up 0.38%. The Stoxx 600, meanwhile, is expected to drop slightly by 0.06%.

The minutes of the latest meetings of the Federal Reserve and the European Central Bank seem to confirm that both central banks are preparing to cut rates in September.

In Europe, the salvo of PMI indicators published on Thursday indicates that activity continues to weaken in the monetary sector, with the stronger-than-expected growth in private sector activity probably being attributable to the one-off effect of the Olympic Games.

Germany, the eurozone’s largest economy, saw its private sector activity contract for the second consecutive month, rekindling fears of recession.

Across the Atlantic, the downward revision of the employment figures published by the Labor Department continues to worry investors. The Fed could be encouraged to adopt a more aggressive approach than expected at its September meeting, cutting its rates by 50 basis points and not by 25 bp as the markets had hoped.

Jerome Powell’s speech at the Jackson Hole symposium, which is expected to take place around 14:00 GMT, will therefore be of crucial importance in determining the trajectory of US monetary policy.

Several U.S. central bank officials speaking Thursday suggested that an easing of the Fed’s ultra-tight monetary policy was imminent, expressing support for a “slow and methodical” approach.

Robert Carnell, regional head of research for Asia Pacific at ING, noted that it was still possible that Powell’s speech would excite or disappoint markets, given market pricing, but that much would depend on the data.

“Since any decision that deviates from market prices is based on as-yet unknown data, it is difficult to see how Powell can commit beyond some easing in September, and even then only barring data accidents,” he said.

Investors are also awaiting the publication, around 06:45 GMT, of figures on the business climate in France.

VALUES TO FOLLOW:

BMW sold more electric cars than Tesla in Europe last month for the first time, according to market research firm JATO Dynamics. The German group sold 14,869 electric vehicles in July, about 300 more than Tesla.

A WALL STREET

The New York Stock Exchange ended in the red on Thursday, led by a decline in technology stocks, as central bankers met in Jackson Hole, Wyoming.

While US Treasury yields rose after data eased recession fears that had emerged in markets over the summer, big technology stocks – including Wall Street’s “Magnificent Seven” – fell, weighing mainly on the Nasdaq.

The Dow Jones index fell 0.43%, or 177.71 points, to 40,712.78 points.

The broader S&P 500 lost 0.89%, while the Nasdaq declined 1.67%.

IN ASIA

The Tokyo Stock Exchange ended in the green on Friday. While the head of the Japanese central bank, Kazuo Ueda, had initially used a warmongering speech on a possible increase in key rates, his latest comments have somewhat reassured the markets.

The Nikkei index gained 0.4% to 38,364.27 points, while the broader Topix gained 0.5% to 2,684.72 points.

In China, the Shanghai Stock Exchange composite index fell by 0.1% and the CSI 300 of large capitalizations advanced by 0.24%.

RATE

Speculation about the Fed’s lowering of key rates is weighing on the bond sector.

The yield on ten-year Treasuries fell 1.4 basis points to 3.8482%, while the two-year fell 1.5 basis points to 3.9955%.

The yield on the ten-year German Bund, the benchmark for the eurozone, rose 0.4 bp to 2.2480%, compared with 0.7 bp to 2.4080% for the two-year.

CHANGES

Weighed down by investor concerns about the approach the Federal Reserve will take at its next meeting, the dollar continues to erode, despite a small recovery in recent days.

The dollar fell 0.18% against a basket of benchmark currencies.

The euro, galvanized by the weakness of the American currency, rose 0.13% to 1.1127 dollars.

OIL

Oil prices were steady on Friday after a turbulent week marked by concerns over the health of the U.S. economy and the resumption of ceasefire talks in Gaza.

The barrel of Brent is stable, advancing by 0.06% to 77.27 dollars, like that of American light crude (WTI), which is gaining 0.07% to 73.06 dollars.

(Written by Pauline Foret, edited by Augustin Turpin)

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