Monday, 13 June 2022 06:56
European equities will open lower on Monday after disappointing US inflation figures last Friday, which could mean the Federal Reserve will raise interest rates even more aggressively.
IG predicts an opening loss of 219 points for the German DAX and a minus of 101 points for the French CAC 40. The British FTSE looks to open 47 points lower.
The stock markets in Europe ended well in minus Friday. Following the rate hike announced by the European Central Bank on July on Thursday, investors were mainly consuming US inflation figures on Friday.
According to market analyst Michael Hewson of CMC Markets, it has been a negative week for markets, with investors increasingly concerned about inflation, which does not appear to be cooling and is expected to affect both consumer confidence and corporate earnings.
“The initial optimism about a reopening of the Chinese economy at the beginning of the week has turned into gloom as the Shanghai authorities declare new closures and restrictions,” Hewson added.
A significant increase in Europe was the price of the Just Eat Takeaway share. According to Bloomberg, there is interest among private equity firms in an acquisition of Grubhub from the food delivery company in Amsterdam. The share rose almost 6 percent.
In Frankfurt, only Deutsche Boerse managed to get up. The stock rose about one percent. Deutsche Bank landed at the bottom of the DAX and lost almost 6 percent. Siemens lost more than 5 percent.
In Paris, Euroapi was the only climber with a plus of just over one percent. The largest declines were the French banks with losses of 5 to 6 percent for BNP Paribas, Société Générale and Credit Agricole.
Euro STOXX 50 3,596.64 (-3.4%)
STOXX Europe 600 422.71 (-2.7%)
DAX 13,761.83 (-3.1%)
CAC 40 6,187.23 (-2.7%)
FTSE 100 7,317.52 (-2.1%)
SMI 11,084.62 (-2.1%)
AEX 681.97 (-2.5%)
BEL 20 3,770.25 (-2.1%)
FTSE MIB 22,547.48 (-5.2%)
IBEX 35 8,390.60 (-3.7%)
US futures predict a red opening on Monday.
US stocks closed markedly lower on Friday. Investors processed new inflation data from the US. The hope was in advance that a climax had been reached. However, inflation rose to 8.6 percent in May, both higher than in April and analysts at 8.3 percent had expected. Core inflation was 6.0 percent, above the forecast of 5.9 percent.
Inflation remains “pigging hot,” said AvaTrade market analyst Naeem Aslam. He believes that inflation is still far from a peak, and this fuels fears of recession.
High inflation also fuels expectations that the Federal Reserve will raise interest rates by 50 basis points in September after the June and July meetings, according to Rabobank’s market analyst Philip Marey.
He specifically pointed to housing spending, which rose to 5.5 percent year-on-year in May. On a monthly basis, housing inflation rose from 0.5 to 0.6 percent.
According to Rabobank, the latter figures are crucial because housing costs largely determine core inflation.
“A study released last week indicated that these costs will not fall in the foreseeable future, and that implies that core inflation does not appear to be declining. The Fed will definitely have to take that into account,” said Marey.
“The Fed has not yet commented on September, but the figure for May shows that falling inflation is not yet on the horizon, and therefore the chance of it reporting in the second half has not increased,” Mary said.
The Fed will announce its interest rate decision next week. Economists at Barclays do not rule out that interest rates will rise by 75 basis points. The market now estimates that chance at 31 percent, according to the CME FedWatch Tool. That was about 3.6 percent before inflation figures.
“We believe the Federal Reserve now has good reason to surprise markets by rising more aggressively,” Barclays economists said. It could also be that the June interest rate meeting comes too early for this and that it will happen in July, the British bank believes.
The US 10-year yield was 3.17 percent Friday night. The spread between the 10-year and 2-year bond yields has fallen to 13 basis points. The yield on five-year government bonds was 3.26 percent, and that on 30-year bonds at 3.20 percent.
It was also announced Friday that consumer confidence measured by the University of Michigan hit a low of just over 50 in May.
“Consumer confidence has fallen 14 percent since May, continuing the downward trend of the past year and reaching a low comparable to the 1980s recession,” said Joanne Hsu of the University of Michigan.
WTI oil cost more than $ 120 per barrel. barrel on Friday, making it about 1.5 percent more expensive on a weekly basis.
Walmart was the only winner in the Dow Jones index with a gain of about one percent.
Advanced Micro Devices are optimistic and expect continued growth. The US chip maker is aiming for revenue growth of 20 percent and a cash flow margin of more than 25 percent for this year. The gross margin is expected to exceed 57 percent. The gross margin target is especially important for investors. Just a few quarters ago, AMD was able to shoot through the 50 percent for the first time, while its big competitor Intel is struggling to get over 50 percent. The stock fell 4 percent.
The DocuSign stock lost nearly a quarter of its value after disappointing quarterly figures.
Shares in biotech company Illumina fell more than 9 percent on Friday after CFO Sam Samad’s resignation was announced a day earlier.
S&P 500 Index 3,900.86 (-2.9%)
Dow Jones Index 31,392.79 (-2.7%)
Nasdaq Composite 11,340.02 (-3.5%)
Asian stocks traded significantly lower on Monday.
Nikkei 225 27,050.87 (-2.8%)
Shanghai Composite 3,248.51 (-1.1%)
Hang Seng 21,193.95 (-2.8%)
Euro / dollar traded at 1.0487 this morning. When US markets closed on Friday, the currency pair moved to 1.0523.
USD / JPYYen 135.00
EUR / USD Euro 1.0487
EUR / JPY Yen 141.56
06:30 Bankruptcies – May (NL)
08:00 Trade Balance – April (UK)
08:00 Industrial Manufacturing – April (UK)
00:00 ING – Investor Day
22:00 Oracle – figures for 2nd quarter in the USA
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