The chart of the German DAX stock index pictured at the Frankfurt Stock Exchange
by Claude Chendjou
PARIS (Reuters) – The main European stock markets are expected to rise slightly on Friday despite the close in the red on Wall Street, but the trend should remain cautious due to an almost general monetary tightening of the major central banks in the world while the economic prospects are deteriorating.
According to the first indications available, the Dax in Frankfurt should gain at the opening 0.11%, the FTSE 100 in London 0.24% and the EuroStoxx 50 index 0.09%.
The almost synchronized rise this week in interest rates by several central banks, including the US Federal Reserve, and the multiple warnings on the risks of recession heighten uncertainties, pushing investors to take refuge in the dollar and the bond market to the detriment stocks, say analysts.
“Excessive quantitative easing over the past decade is going to lead to excessive tightening and the market has no way to properly gauge the impact on prices,” said David Bahnsen, chief investment officer at wealth manager The Bahnsen Group.
The publication this Friday of monthly PMIs on manufacturing activity and that of services could, however, provide investors with new elements on the evolution of the economic situation.
The Reuters consensus expects a further contraction in the euro zone of the composite PMI index, which includes the manufacturing industry sector and the services sector, to 49.0 in September after 49.6 the previous month.
In Great Britain, the new Prime Minister Liz Truss must also announce this Friday a new “growth plan” which should provide additional budgetary support to the economy.
AT WALL STREET
The New York Stock Exchange ended lower on Thursday, as technology and growth stocks suffered from the rate hike decided on Wednesday by the US Federal Reserve.
The Dow Jones Industrial Average fell 0.35%, or 107.1 points, to 30,076.68 points.
The broader S&P-500 fell 31.94 points, or 0.84%, to 3,757.99 points.
The Nasdaq Composite fell for its part by 153.39 points (-1.37%) to 11,066.81 points.
On the Tokyo Stock Exchange, the Nikkei index fell 0.58% to 27,153.83 points and the wider Topix fell 0.24% to 1,916.12 points as the close approached.
In China, the Shanghai SSE Composite lost 0.04%, while the CSI 300 gained 0.3%.
Bond yields are benefiting from announcements this week of interest rate hikes in the US, UK, Sweden, Switzerland and Norway among others.
The German two-year yield hit a more than 11-year high on Thursday at 1.897% and the ten-year yield then rose to a peak since September 2013, at 1.963%.
In the United States, the yield on ten-year Treasuries gained up to 20 basis points to 3.71%, benefiting from the rise in rate expectations, the Fed having announced that its rates could peak at 4.6% in 2023.
On the foreign exchange market, traders continue to digest the announcement Thursday of an intervention by Japan to support the yen, a first since 1998.
The yen, which rose before this intervention to nearly 146 to the dollar, is trading Friday at 142.16, up 0.13% against the greenback.
The euro, down 0.13% to 0.9823 dollar, is penalized by the energy crisis in Europe and the evolution of the war in Ukraine, referendums on an attachment to Russia being planned this Friday in the territories occupied Ukrainians.
The Chinese yuan, which fell to 7.0964 to the dollar, is near a two-year low.
The dollar, which is at a 20-year high, is stable (-0.03%) against a basket of reference currencies, thanks to its status as a safe-haven asset and the sustained pace of the Fed’s rate hike .
Oil prices are affected by the strength of the dollar and fears over demand.
Brent lost 0.27% to 90.22 dollars a barrel and US light crude (West Texas Intermediate, WTI) lost 0.28% to 83.26 dollars a barrel.
(Written by Claude Chendjou, edited by Jean-Stéphane Brosse)