by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to open virtually unchanged on Tuesday, following the Asian markets where a wait-and-see attitude prevails, after the long weekend on Wall Street and on the second day of a week marked by numerous economic indicators, including U.S. employment figures.

According to the first available indications, the Parisian CAC 40 should gain 0.03% at the opening. The Dax in Frankfurt could advance by 0.11%, while the FTSE 100 in London should gain 0.15%. The EuroStoxx 50 index is expected to increase by 0.06% and the Stoxx 600 to rise by 0.08%.

Trading volumes are expected to rebound with the reopening of US markets, closed on Monday for Labor Day in the United States, while on the macroeconomic indicators side, the market is awaiting the publication of the ISM manufacturing index in the United States for the month of August.

In Europe, manufacturing PMIs showed on Monday that activity had contracted further in August in the eurozone with a final index at 45.8, while in the United Kingdom, it recorded its best performance in two years last month (index at 52.5), a sign of renewed dynamism in the country’s economy.

Beyond these indicators, investors are mainly waiting for the publication on Friday of the official monthly report from the US Department of Labor on job creation, wages and unemployment. It could influence the extent of the rate cut expected from the US Federal Reserve (Fed) which meets on September 17 and 18, with expectations ranging from a reduction of 25 to 50 basis points.

Analysts say much of the focus is on U.S. employment: “It’s really going to depend on Friday’s number,” wrote Raisah Rasid, global market strategist at JP Morgan Asset Management, noting that Fed officials are hoping for a slowdown in the labor market to pave the way for rate cuts.

“We don’t see any stress or any indication that would require a 50 basis point cut (…) the question is how long will risk assets continue to rise?” he adds.

In the euro zone, where the European Central Bank (ECB) meets on September 12, sources told Reuters there were differences within the Frankfurt-based institution over the path of rates beyond that deadline due to the impact of a possible recession in the bloc.

A WALL STREET

The New York Stock Exchange ended higher on Friday, as the release of PCE inflation figures reinforced investors’ expectations of an interest rate cut in September.

The Dow Jones index gained 0.6%, or 228.03 points, to 41,563.08 points.

The broader S&P 500 gained 56.44 points, or 1 percent, to 5,648.40.

The Nasdaq Composite rose 197.194 points, or 1.1%, to 17,713.624 points.

The personal consumption expenditure (PCE) index rose 2.5% in July from a year earlier.

IN ASIA

On the Tokyo Stock Exchange, as the closing approached, the Nikkei index turned around and is now down 0.21% at 38,620.28 points, penalized by the sudden strengthening of the yen which is affecting export stocks. The broader Topix gained 0.47% to 2,728.74 points.

The MSCI index grouping together Asian and Pacific stocks (excluding Japan) gained 0.10%.

In China, the Shanghai SSE Composite fell by 0.54%, penalized by the banking sector (-2.15%) and the energy sector (-2.71%). The CSI 300 index, however, gained 0.04%.

VALUES TO FOLLOW IN EUROPE:

CHANGES/RATES

The dollar rose 0.11% against a basket of benchmark currencies on Tuesday as traders took positions ahead of a series of economic data, including U.S. jobs figures.

The euro fell by 0.14% to 1.1054 dollars, not far from the two-week low reached in the session on Monday at 1.1042.

The pound sterling is trading at $1.3125 (-0.19%).

The yen rose 0.22% to 146.59 per dollar after falling to 152 during the session.

The yield on the 10-year US Treasury bond was stable at 3.9168%, and the two-year bond was also virtually unchanged at 3.9332%.

OIL

The oil market was trading in mixed order on Tuesday, with weak demand, particularly in China, weighing on Brent despite the blockade of crude production in Libya.

Brent fell 0.36% to $77.24 a barrel. US light crude (West Texas Intermediate, WTI) rose 0.52% after the market was closed for Labor Day in the United States on Monday.

(Written by Claude Chendjou)

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