Europe ends lower, caution ahead of the Fed - 01/18/2022 at 18:35

Europe ends lower, caution ahead of the Fed – 01/18/2022 at 18:35

Europe the end of the landing, warned before the reserve

Europe the end of the landing, warned before the reserve

by Claude Shingo

PARIS (Reuters) – European stock markets closed lower on Tuesday and Wall Street was also trading in the middle of the red session, with stock markets hurt by rising bond yields amid expectations of higher interest rates this year in the United States.

In Paris, the CAC 40 index closed down 0.94% at 7,133.83 points. The British FTSE fell 0.63% and the German DAX 1.01%.

The EuroStoxx 50 Index is down 1.03%, the FTSEurofirst 300 Index is down 0.75%, and the Stoxx 600 Index is down 0.97%.

The US Federal Reserve’s monetary policy committee meets on January 25-26 and investors are counting on the rate-raising cycle starting in March to counter inflation.

In Japan, the country’s central bank on Tuesday raised its inflation forecast for the fiscal year beginning next April, citing increased risks that the recent rise in prices will extend beyond commodities.

On the old continent, despite last month’s pledge by the European Central Bank to continue to support the economy, money markets are now assessing the possibility of a 20 basis point interest rate hike of 100% for the institution by next December.

On Wednesday and Thursday, the final inflation figures for Germany and the Eurozone, respectively, for the month of December will be published.

The start of corporate earnings season also prompts investors to be cautious.

values ​​in Europe

In Europe, Microsoft’s announcement of its $68.7 billion (€59.5 billion) acquisition of Activision Blizzard shook the video game sector.

Ubisoft, which some analysts see as the next target for the industry after TakeTwo also bought Zynga last week for $12.7 billion, is up 11.86%. Rovio, CD Projekt, Frontier, and Paradox gained 2.24%, 1.54%, 6.06%, and 2.84%, respectively.

At the sectoral level, higher oil prices enabled the European energy sector (+1.05%) to escape the general downturn in the major indicators.

TotalEnergies gained 1.49%, TechnipFMC 2.13% and CGG 2.03%.

But the air transport and entertainment sector (-1.49%) was affected by the rise in crude oil prices. Lufthansa and Air France-KLM lost 1.55% and 1.09%, respectively

The New Technologies division was affected by higher bond yields, with Worldline down 3.86% and Dassault Systèmes down 1.55%.

Elsewhere in Europe, chocolate maker Lindt & Sprüngli lost 2.96% after publishing its results showing slowing activity in North America due to bottlenecks in the supply chain.

Wall Street

At the time of closing in Europe, the Dow Jones fell by 1.43%, the Standard & Poor’s 500 fell by 1.46% and the Nasdaq by 1.78%, especially punished by the decline of technology stocks (-1.56%) and Goldman Sachs. (-7.66%), Energy (+0.41%) is the only sector in the green zone.

After mixed announcements from JPMorgan Chase and Citigroup last week, which kicked off the quarterly corporate accounts season, Goldman Sachs reported lower-than-expected earnings on Tuesday. The Banking Index declined by 2.39%.

Microsoft (-1.33%) and Activision Blizzard (+27.18%) lead the trend on Wall Street after the merger. Electronic Arts, Take-Two Interactive Software, and Zynga take 5.3%, 4.01%, and 1.06%, respectively.

Today’s indicators

In Germany, investor sentiment improved much more than expected since the beginning of January, with the ZEW index at 51.7 after 29.9 in December, the Institute’s monthly survey for economic studies showed on Tuesday.

In the United States, manufacturing activity in the New York region for its part contracted sharply in January, heading into negative territory for the first time since June 2020, according to the monthly survey of the regional branch of the Federal Reserve.

the changes

In the foreign exchange market, the dollar benefited from higher bond yields and rose 0.51% against other major currencies, heading for the sixth consecutive session in the green.

The euro fell by 0.66, falling below the symbolic threshold of $1.14, at 1.1334.

an average

Bond yields continue to rise as the Federal Reserve may raise interest rates.

The price of US ten-year Treasury bonds rose 7.5 basis points, to 1.8466%, the highest level since January 2020, while the two-year interest rate, which is most sensitive to changes in price expectations, jumped 7.1 basis points to 1.0384%, exceeding the maximum. Threshold of 1% for the first time since February 2020.

In Europe, the German ten-year bond yield, the benchmark for the eurozone, ended less than a point, at -0.017%, after rising to -0.002%, a new test of the bottom line. Evolving since May 2019.

oil

Geopolitical tensions support the oil market, with Houthi rebels claiming responsibility for a drone attack near Abu Dhabi airport on Monday.

Brent crude rose 0.44% to $86.84 a barrel after hitting 88.13, the highest level since October 2014, and US light sweet crude (WTI) rose 1.09% to $84 a barrel after the highest level at 85.74.

Goldman Sachs estimates that the price of a barrel of Brent could reach $100 in the second half.

(Reporting by Claude Shingo, Editing by Sophie Lott)

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