INCREASED EXPLANATIONS IN EUROPE AFTER RATE FALL IN CHINA
PARIS (Reuters) – Major European stock markets are expected to rise sharply on Friday, following major Asian markets, after the People’s Bank of China (PBOC) announced a notable cut in one of its key key rates, fresh stimulus for the world’s second-largest economy.
Index futures contracts are up 1.14% for the Dax in Frankfurt, 1.29% for the FTSE 100 in London and 1.13% for the EuroStoxx 50. As for the CAC 40 in Paris, the first forecast is for an increase of around 1 %. available indications.
BPC cut by 15 basis points to 4.45% its main five-year lending rate, which serves as a benchmark for the Chinese mortgage market. This is the biggest decline since the revision of the central bank’s interest rate system in 2019, when economists were expecting a cut of only five to ten points.
“While this will certainly not be enough to counter all the headwinds holding growth in the second quarter, this is a step in the right direction and markets are reacting, expecting perhaps further easing,” said Carlos Casanova. Senior Economist for Asia at UBP in Hong Kong.
So far, the news has taken precedence over concerns about global inflation, monetary tightening in both the US and Europe, and the risk of a US recession, which have dominated market sentiment in recent days.
The CAC 40 shed 1.41% in the first four sessions of the week, while the broad European Stoxx 600 lost 1.27%. First of all, the US Standard & Poor’s 500 fell 3.06% and is heading down for the seventh week in a row. This is 18% less than on January 3rd.
ON WALL STREET
The New York Stock Exchange closed lower on Thursday but above its daily lows after a rollercoaster session marked by Cisco Systems’ drop after lowering its forecast, raising concerns about inflation and rising interest rates.
The Dow Jones fell 0.75% to 31,253.13, Standard & Poor’s lost 0.58% to 3900.79 and the Nasdaq Composite fell 0.26% to 11,388.50.
Cisco fell 13.7% after lowering its full-year revenue growth forecast, which was attributed to the impact of its exit from Russia and component shortages due to measures to contain the spread of COVID-19.19 in China.
Semiconductor equipment specialist Applied Materials closed 1.7% after the close, lowering Wall Street’s current-quarter guidance.
Indices futures so far suggest a rebound of 0.6% for the Dow and 1.1% for the Nasdaq.
On the Tokyo Stock Exchange, the Nikkei gained 1.3% less than an hour before the close and thus recouped about half of its losses from the previous day, thanks to cheap buying by investors who bet on improved corporate results, thanks in part to exchange rate effects.
In China, the Shanghai SSE Composite rose 1.19% and the CSI 300 rose 1.46% after the decision by the People’s Bank of China, which also backs Hong Kong’s Hang Seng (+2.06%).
The dollar rose against other major currencies (+0.19%), but this rebound should not prevent it from recording its first negative weekly performance since the beginning of April, as it is now down by just over 1.5% on the week after 10% jump since mid-January.
The euro, for its part, returned to $1.0579, down 0.07% but approaching a gain of about 1.5% for the week.
The yield on 10-year US Treasury bonds fell to 2.8424% in Asian trading, while the two-year yield rose slightly to 2.6265%.
Both fell on Thursday, fears of a rapid deterioration in the economic situation in the US called into question in the eyes of some investors the scenario of an accelerated tightening of monetary policy by the Federal Reserve.
Thus, 10-year papers returned to 2.772%, the lowest level since the end of April, 43 basis points below last week’s peak.
The risk of a marked slowdown in global growth, which will limit the demand for oil, weighs on the price of a barrel: Brent falls by 0.75% to $111.20 per barrel, and US light oil (West Texas Intermediate, WTI) – by 1.21% to $110.85.
(Written by Marc Angrand with Andrew Galbraith in Shanghai)