New downturn expected in Europe after disappointing Chinese figures – 05/16/2022 at 08:35


MAJOR EUROPEAN STOCK EXCHANGE EXPECTED TO FALL

PARIS (Reuters) – Major European stock markets are expected to fall on Monday after China’s economic data released below expectations, which highlight the impact of recent weeks’ restrictions on the second world economy.

Index futures are down 0.43% for the CAC 40 in Paris, 0.36% for the Dax in Frankfurt, 0.49% for the FTSE 100 in London and 0.46% for the EuroStoxx 50.

In China, retail sales fell 11.1% in April compared to the same month last year, almost double what was expected, while industrial production fell 2.9% – the biggest drop since February 2020 – at the time. as the Reuters consensus forecast showed it to be slightly higher. As for the official unemployment rate, it reached 6.1% after 5.8% in April.

Those numbers appear to be attributable to the degree of health restrictions imposed by the authorities in an attempt to stem the resurgence of the COVID-19 epidemic, measures that are beginning to be eased as Shanghai’s full deconfinement is scheduled here for June. 1st.

But they cast doubt on Beijing’s ability to meet its goal of gross domestic product (GDP) growth of around 5.5% for the full year.

These questions are in addition to questions about the ability of the US economy to withstand the shock of the rapid interest rate hike initiated by the Federal Reserve without much damage.

Goldman Sachs also cut its US growth forecast to 2.4% this year and 1.6% next year.

“Our financial conditions index is down more than 100 basis points, suggesting a slowdown in GDP growth of about a percentage point,” said Jan Hatzius, an economist at Goldman Sachs.

“We expect the recent tightening of financial conditions to continue, in part because we believe the Fed will act as markets predict.”

They expect a 50 basis point rate hike at the next two Fed meetings according to the CME FedWatch barometer, but the possibility of larger hikes is still possible.

The start of the week will be determined, among other things, by data on retail sales and industrial production in the US on Tuesday, as well as public interventions by representatives of the Federal Reserve.

VALUES TO FOLLOW:

ON WALL STREET

The New York Stock Exchange closed higher on Friday as relief from signs that inflation may have peaked outweighed fears that a tightening of the Federal Reserve could send the economy into a tailspin.

The Dow Jones Index added 1.47% or 466.36 points to 32,196.66 points, the Standard & Poor’s 500 added 93.81 points (+2.39%) to 4,023.89, and the Nasdaq Composite rose 434 .04 points (+3.82%) to 11,805.00.

The rebound of large capex in the technology sector continued the session: Microsoft rose 2.26%, Apple – 3.19%.

Despite this advance, the S&P 500 and Nasdaq recorded their sixth week of decline, the longest period of losses since the fall of 2012 for the S&P 500 and the spring of 2011 for the Nasdaq.

Futures for the major indexes currently suggest a decline of 0.4% to 0.7%.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index rose 0.45% after a sharp decline in growth in response to today’s Chinese indicators; it gained 1.55% at the start of the session, taking advantage of the Nasdaq’s momentum.

In China, the Shanghai SSE Composite lost 0.42% and the CSI 300 lost 0.81%.

CHANGES

The dollar has been fluctuating against other major currencies but remains close to a 20-year high hit on Friday in session.

The euro is hovering around $1.04 after falling to 1.0354 on Friday, its lowest level since early 2017.

In terms of cryptocurrency, Bitcoin remains above $30,000 after falling to $21,400 on Thursday, its lowest level since December 2020.

INDICATOR

In the government bond market, the yield on ten-year US bonds fluctuates around 2.9%. It rose sharply on Friday after the announcement of unexpected stability in US import prices last month.

Its German equivalent remained virtually unchanged in early trading at 0.943%.

BUTTER

The oil market is taking profits after gaining almost 4% on Friday, although the risk of supply tensions in the event of a European embargo on Russian oil limits the decline.

The price of Brent crude fell 1.72% to $109.63 a barrel, while the price of US light oil (West Texas Intermediate, WTI) fell 1.45% to $108.89.

The latter reached at the very beginning of the day the highest level since March 28 at $111.71.

(Written by Marc Angrand, with Wayne Cole in Sydney, edited by Mathieu Protard)

.