by Claude Chendjou

PARIS (Reuters) – European scholarships finished in red Tuesday after the intensification of fighting between Israel and Iran on the fifth day of a conflict that feeds fears of a regional conflagration and pushes the prices of oil upwards.

In Paris, the CAC 40 ended with a loss of 0.76% to 7,683.73 points. The British Footsie fell 0.46% and the German Dax reflected by 1.03%.

The Eurostoxx 50 index lost 0.92%, the FTSEUROFIRST 300 0.82%and the STOXX 600 0.80%, all the large compartments of the latter index that ended in red, with the exception of that of energy (+1.23%).

At the time of the closing in Europe, the Dow Jones fell 0.12%, the Standard & Poor’s 500 of 0.25% and the NASDAQ of 0.27% on the eve of the decision of monetary policy of the American Federal Reserve (Fed).

As in Europe, apart from the energy sector (+1.26%), caution dominates in the American markets while investors are preparing to dissect the words of Jerome Powell, the president of the Fed, on interest rates, inflation, customs duties and the economic situation in general.

The American data published on Tuesday showed a surprise drop in industrial production and a more marked withdrawal of retail sales in May, notably with the entry into force of new surcharge into the automobile.

On the geopolitical front, Tehran threatened to intensify his attacks against Israel in the coming hours, while TSAhal announced that he had killed Ali Chadmani, the Iranian chief of staff, five days after the first Israeli bombings on Iranian nuclear sites.

Investors mainly fear that the conflict between Israel and Iran creates bottlenecks on oil exports from the Middle East while two oil tankers collided and caught fire near the Strait of Ormuz in a context of increase in electronic interference against the background of war.

A sign of generalized concern, the Vix index with Wall Street has passed over the 20-point threshold, while its equivalent on Euro Stoxx 50, the VSTOXX, jumped from 10.61% to 22.1 points.

“Investors are trying to take all this into account. I think it is very difficult at the moment. And there is an understandable degree of nervousness,” sums up Chris Beauchamp, market analyst at IG, also citing expectations around the Bank of England (BOE) and the Swiss National Bank (BNS), which meet on Thursday.

Values ​​in Europe

An American project for the progressive suppression of solar and wind credits by 2028 has weighed on European groups specializing in renewable energies: SMA Solar fell 8.10%, Orsted by 1.88%, Nordx by 2.58%and vestas of 3.57%.

Asos lost 1.11%, the appointment by the British fashion group of Aaron Izzard as a financial director, replacing Dave Murray, not having convinced.

Universal Music Group NV abandoned 2.72% after a sale of actions by the group by Goldman Sachs with a discount.

Ashtead advanced 4.15% after volatile exchanges following the annual forecasts of the construction equipment rental group.

The indicators of the day

The morale of investors in Germany has improved faster than expected since the beginning of June, with an index at 47.5, according to the survey of the Institute of Economic Studies ZEW.

Changes

The dollar featured 0.48% in the face of a basket of reference currencies after mixed indicators in the United States showing that consumers became more cautious while uncertainty about trade and inflation persists before the Fed decision.

The euro bent at 0.26%, to 1.1531 dollars, while the pound sterling exchanges $ 1.3,510 (-0.46%), two days before the BOE decision.

The yen is treated at 145.02 for a dollar (-0.21%) after the status quo observed by the Bank of Japan (BOJ) on rates.

RATE

The yield of American treasury bills at ten years fell from 3.4 base points to 4.4205%, and that at two years is stable, at 3.9602%, investors focusing on Fed’s prospects.

Since May 1, the ten years has been maintained between a minimum of 4.124% and a maximum of 4.629%.

The term contracts show that traders count on a drop of 46 basic points of the Fed rates by the end of the year when a status quo on rates is expected on Wednesday.

The yield of the German Bund in the same deadline has finished almost unchanged, at 2.53%, and the two years advanced 2.1 base points, to 1.86%.

That of the French OAT at ten years fluctuated between 3.26% and 3.27% before ending at 3.24% while the “conclave” on pensions touches its end and that the Prime Minister, François Bayrou, said he was confident on “margins of understanding” of the social partners.

The yield gap between the Bund and the OAT at ten years has not varied much, remaining around 70 base points.

OIL

The oil market rises while the conflict between Iran and Israel is intensifying even if the main infrastructures and oil and gas flows have so far been spared by a notable impact.

The Brent increased by 2.25% to 74.83 dollars per barrel and light American crude (West Texas Intermediate, WTI) from 2.06% to 73.25 dollars.

To be continued Wednesday:

(Written by Claude Chendjou, edited by Blandine Hénault)

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