Falling Yields Allow Stocks to Rebound – 04/07/2022 at 1:11 PM


FALLING YIELDS ALLOW EQUITIES TO REBOUND

by Marc Angrand

PARIS (Reuters) – Wall Street is expected to rise and European stocks ex-London rose mid-session on Thursday as falling bond yields allowed stocks to rally even as prices tightened. Monetary policies and the war in Ukraine limit the potential for a stock market rebound.

Futures contracts on major New York indices forecast a gain of 0.09% for the Dow Jones, 0.26% for the Standard & Poor’s 500 and 0.48% for the Nasdaq.

In Paris, the CAC 40 was up 0.79% to 6,550.48 points at 10:50 GMT and in Frankfurt, the Dax was up 0.62% while in London, the FTSE 100 was down 0.03%. , penalized by the drop in energy and raw materials.

The EuroStoxx 50 index rose 0.79%, the FTSEurofirst 300 0.71% and the Stoxx 600 0.73%.

The latter lost 1.53% on Wednesday, its biggest decline in a session since March 10, and Wall Street then closed in red after the publication of the minutes of the last meeting of the Federal Reserve, which confirms the intention of this last to raise rates. and reduce its balance sheet at a sustained rate in the coming months.

Investors are now awaiting (at 11:30 GMT) the minutes of the European Central Bank’s (ECB) March meeting, hoping to get more guidance on its plans to hike rates and halt asset purchases.

QUALIFY

However, government bond yields started to fall again after the maximum recorded in recent days, and some analysts judged that the content of the Fed’s “minutes” was already priced in.

The ten-year US Treasury bond fell more than two basis points to 2.5939% and the two-year fell more than six points to 2.4432%.

In Europe, the ten-year German is back at 0.645%. Its French equivalent fell more sharply, to 1.17%, after an uneventful auction of €11.5 billion in OAT, the maximum amount forecast by Agence France Trésor (AFT).

At 52.3 points, the 10-year spread between French and German stocks continues to moderate after rising sharply at the start of the week, linked to the proximity of the presidential election.

CHANGES

In the foreign exchange market, the dollar remained practically unchanged against the main currencies (+0.06%), very close to the maximum of almost two years reached shortly before in the day.

The Federal Reserve meeting minutes “suggest that the Fed is hitting the brakes hard, which should be positive for the dollar,” ING analysts summarized in a note.

The euro is hovering around $1.09 ahead of ECB minutes, after falling to $1.0866, its lowest level since March 8.

WALL STREET VALUES TO FOLLOW

VALUES IN EUROPE

The start of a stock market rally in Europe is benefiting defensive stocks, among other things: the Stoxx health index gained 1.6% and set a record, the telecommunications index gained 0.95%, the community services index (“utilities”) 0.68%.

Raw materials (-0.25%) and energy (-0.34%) suffered on the other hand from the strength of the dollar.

Shell (-1.17%) is also sanctioned after announcing that its departure from Russia would entail exceptional expenses that could reach five billion dollars, much more than initially estimated.

In M&A news, Italian highway and airport operator Atlantia jumped 7.98%. Global Infrastructure Partners (GIP) and Brookfield Infrastructure have announced that they have approached him and he could attract another offer according to multiple sources familiar with the matter.

PETROLEUM

Oil prices confirm their rebound after Wednesday’s fall, which took them to their lowest level in three weeks in response to the announcement by the International Energy Agency (IEA) of a massive use of its strategic reserves.

Brent gained 1.76% to $102.85 a barrel and US light crude (West Texas Intermediate, WTI) 1.7% to $97.87.

(Marc Angrand French version)

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