PARIS (Reuters) – European stock markets ended lower on Monday as investors positioned themselves for a number of monetary policy decisions this week.

In Paris, the CAC 40 fell 0.21% to 7,449.44 points, while the German Dax fell 0.38% and the British Footsie gained 0.06%.

The EuroStoxx 50 index ended the session down 0.4%, while the FTSEurofirst 300 lost 0.18% and the Stoxx 600 fell 0.2%.

The Federal Reserve’s next monetary policy decision is expected on Wednesday and is the main event of the week.

While it is almost certain that the central bank will lower its rates on this occasion, observers are still uncertain of the extent of this reduction and especially of the diagnosis that the central bank will make on the American economy – and which will determine the rest of the monetary policy trajectory.

If the central bank sees undue weakness in the jobs market, investors could fear a renewed U.S. recession; however, a dovish Fed would put pressure on risky assets and bonds, with markets pricing in nearly 120 basis points of easing by December.

Another risk factor for global markets is the Bank of Japan meeting on Friday.

The institution has a habit of surprising observers: the decision to raise its rates in August triggered a wave of panic on global markets.

A restrictive speech could again have repercussions on assets around the world, in particular if it supports the performance of Japanese sovereign bonds: Japanese investors, very present on foreign markets, could prefer to return to their domestic securities.

Finally, the Bank of England will decide on its rates on Thursday, which it should maintain at its current level.

A WALL STREET

Wall Street was hesitant in mid-session trading as investors welcomed the latest “Empire State” activity data that suggested industrial sector activity was finally starting to recover, even as uncertainty remained over the Fed’s next monetary policy decision.

At the time of the European closing, trading on the New York Stock Exchange indicated a 0.17% increase for the Dow Jones, against a 0.2% decline for the Standard & Poor’s 500 and 0.71% for the Nasdaq Composite.

Dow Jones hits record high in session after industrial activity figures.

VALUES

Rexel gained 9.1% after announcing on Sunday that it had rejected a proposal to buy QXO, the group owned by billionaire Brad Jacobs, for 8.46 billion euros.

Worldline fell 13.9% to a new record low, extending losses from Friday, as analysts highlighted uncertainty over the French payments group’s financial recovery and management changes.

Animal health specialist Virbac climbed 7% after reporting better-than-expected half-year profit and confirming its full-year guidance.

Icade (+3.9%) and Ipsen (+4.5%) both closed higher after recommendation upgrades.

Phoenix Group fell 5% after it announced on Monday that it had suspended the sale of its SunLife division due to regulatory uncertainty.

RATE

Yields are edging lower on both sides of the Atlantic as investors digest the latest US activity data that suggests the industrial sector may finally be returning to growth in the US.

The yield on the German ten-year bond fell by 2.8 bp to 2.122%, while the two-year rate fell by 2.2 bp to 2.184%.

At the time of the European close, the yield on the 10-year Treasury note fell by 1.8 bps to 3.6307%, while the yield on the two-year note fell by 1.9 bps to 3.5571%.

CHANGES

The euro is strengthening against the dollar as traders believe the interest rate gap between the United States and the euro zone will close faster than expected.

The dollar fell 0.35% against a basket of benchmark currencies, the euro rose 0.42% to $1.1122, and the pound strengthened 0.65% to $1.3207.

OIL

Crude prices are rising as Gulf of Mexico production curbs continue and traders prepare for the Fed’s next rate cut.

Brent rose 1.33% to $72.56 per barrel, while American light crude (West Texas Intermediate, WTI) rose 1.69% to $69.81.

(Written by Corentin Chappron, edited by Blandine Hénault)

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