Europe ends in the red, inflation worries – 05/12/2022 at 18:53


EUROPEAN STOCK MARKETS COMPLETED DECLINE

Claude Chanju

PARIS (Reuters) – European stock markets closed lower on Thursday, and Wall Street also traded lower mid-session on fears of accelerated U.S. monetary tightening, which could eventually weigh on global growth.

In Paris, the CAC 40 lost 1.01% to 6,206.26 points. Britain’s Footsie fell 1.56% and Germany’s Dax fell 0.64%.

The EuroStoxx 50 fell 0.94%, the FTSEurofirst 300 fell 0.62% and the Stoxx 600 fell 0.75%.

In the United States, money markets generally expect the cost of credit to rise by 75 basis points in June, as new data showed that inflation slowed in April but remained at very high levels.

Producer prices rose 11.0% year-on-year in April, compared with an 11.5% rise in the previous month, while consumer prices rose 8.3%, up 8.5% in March, according to the US Department of Labor.

“We see that inflation is starting to slow down, but the pace is not as fast as we hoped. So I think that the markets are still afraid of inflation,” – said Jin. Cetera Investment Management.

“There is really a lot of uncertainty around the Fed right now. If it is too aggressive, it will hurt economic growth, but (if) it is too conservative, higher inflation will hurt consumption, which will also affect growth,” he added.

In the euro area, which has an annual inflation rate of 7.5%, several officials from the European Central Bank, such as Ireland’s central bank governor Gabriel Machluf and Peter Casimir, his colleague at the Slovak central bank, again urged the institution to tackle price increases.

“We expect inflation data to remain a focus of policy and investor attention in the coming months,” UBS Global Wealth Management chief investment officer Mark Hefele wrote in a note.

At the same time, the war in Ukraine, Western sanctions against Russia, sanitary restrictions in China continue to weigh on investor morale.

A sign of market nervousness is that the US volatility index rose above 33 points, while its European equivalent rose 4.1% to 32.3 points.

VALUES IN EUROPE

In the pan-European Stoxx 600, all major sectors ended in the red, with consumer goods (-1.32%), basic resources (-2.94%) and automotive (-1.22%) blamed for some of the biggest falls.

Luxury coupes open to China fell, along with Kering, LVMH, Hermès, Richemont and even Tod’s, which lost 1.33% to 2.68%.

Disappointing were the results of Siemens (-2.48%), which announced write-offs and accruals in connection with the withdrawal from Russia, and HeidelbergCement (-4.64%), STMicroelectronics (+3.97%), Commerzbank (+0.26%) . were well received.

British telecom operator BT (+0.96%) took advantage of the announcement of an agreement to merge its sports content division with Discovery.

ON WALL STREET

At the European close, the Dow Jones was down 0.95%, the Standard & Poor’s 500 was down 0.79% and the Nasdaq was down 0.37%.

The session is volatile, fueled by concerns about interest rates and the latest statements by US Treasury Secretary Janet Yellen, who assured that the US Federal Reserve has a plan to reduce inflation without causing a recession.

The technological compartment gives 1.74%. Shares of Apple, which on Wednesday lost its position as the world’s largest market cap to Saudi Aramco, still fell 1% on Foxconn’s warning that demand for electronic products was slowing.

In business results, Walt Disney shares fell 2.6% after the second quarter, below expectations. The entertainment giant also warned that supply issues and rising labor costs could hit its bills.

INDICATORS OF THE DAY

Preliminary data released by the Office for National Statistics (ONS) on Thursday showed that the UK economy recorded an unexpected contraction of 0.1% in March after a drop in car sales linked to supply chain problems.

US jobless claims rose unexpectedly to 203,000 last week.

CHANGES

The dollar index, which measures the dollar’s swing against a basket of currencies, rose 0.73%, its highest in 20 years, thanks to both inflation in the United States and its safe-haven asset status.

The euro, which fell 1.22% to $1.0383, is at its lowest level since January 2017.

In cryptocurrencies, Bitcoin fell to $25,401.05, hitting a 16-month low.

INDICATOR

The 10-year Treasury yield fell 7.1 basis points to 2.8425%, more on doubts about long-term economic growth than short-term inflation.

The spread between 10-year and 2-year US bond yields, which measures recession risk, is currently 26 basis points.

In Europe, 10-year German Bund yields fell 13.1 basis points to 0.872%, while their French equivalent fell 24.5 basis points to 1.384%.

BUTTER

Oil prices are also affected by recessionary fears, which prevail over concerns about supply and geopolitical tensions.

Brent lost 0.41% to $107.95 a barrel, while US light oil (West Texas Intermediate, WTI) fell 0.88% to $106.64.

(Report by Claude Shenju edited by Sophie Luet)

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