Visible bullishness in Europe along with China and hopes for the Fed
By Claude Chenjou
PARIS (Reuters) – Major European stock markets are expected to open higher on Monday, a positive trend boosted by hopes of a slowdown in U.S. interest rate hikes and the reopening of China’s economy. Beijing has decided to turn the page on its “zero COVID” strategy.
According to the first indicators available, the Dax in Frankfurt should gain 0.69% at the opening, the FTSE 100 in London should gain 0.32% and the EuroStoxx 50 index should gain 0.75%.
In the first week of 2023, the CAC 40 gained 5.98% and the Stoxx 600 gained 4.6%, marking their best weekly performance since November 2020 and March 2022, respectively.
The index’s good performance was supported, among other things, by the US Labor Department’s employment report on Friday, which showed a slightly sharper-than-expected slowdown in growth in average hourly wages, reviving the outlook for average hourly wage growth. Credit inflation in the US.
The market estimates the probability that the US Federal Reserve System (FED) will limit the discount rate by a quarter point on February 1 at 77%.
The day’s trend, like the previous ones, should remain cautious, with Fed Chairman Jerome Powell expected to intervene at a conference on central bank independence on Tuesday. The rest of the week will also mark the start of earnings season in the US, with big American banks rolling on Friday as investors fear a tough year ahead for companies.
“Earnings per share for S&P 500 companies excluding the energy sector are expected to decline by 5%,” Goldman Sachs analysts wrote.
In terms of economic statistics in Europe, data on the eurozone unemployment rate is expected at 10:00 GMT and German manufacturing data at 07:00 GMT.
VALUES IN EUROPE:
ON WALL STREET
The New York Stock Exchange ended higher on Friday as the announcement of a slowdown in U.S. wage growth in December left investors hoping for an easing in interest rates.
The Dow Jones Industrial Average rose 2.13% or 700.53 points to 33,630.61.
The broader Standard & Poor’s 500 rose 86.98 points, or 2.28%, to 3,895.08.
The Nasdaq Composite rose 264.05 points (+ 2.56%) to 10,569,294.
The Tokyo Stock Exchange is closed on Monday, and today is an official holiday due to Seijin shiki, the coming-of-age ceremony.
On Friday, the Nikkei index rose 0.59% to 25,973.85, while the broader Topix rose 0.37% to 1,875.76.
In China, the Shanghai SSE Composite gained 0.63% and the CSI 300 gained 0.85% on Monday, as investors cheered the country’s reopening.
Many travelers began flocking to China’s land and sea borders on Sunday as Beijing lifted border restrictions since the start of the health crisis linked to the COVID-19 outbreak. Many Chinese also planned to start traveling abroad again, a recovery in tourism that follows the start of “chun yun,” the 40-day period marking the Lunar New Year.
The yield on the 10-year U.S. Treasury bond, which fell nearly 15 basis points on Friday after the release of the U.S. jobs report, fell slightly again on Monday to 3.57%.
In Europe, the ten-year German Bund yield ended Friday at 2.209%, the lowest level since Dec. 20 in reaction to Eurozone inflation data.
In foreign currencies, the dollar lost 0.34% against a basket of six other currencies, punished by the prospect of reopening Chinese borders and easing exchange rates in the United States.
The euro took advantage of this and rose to $1.0675 (+0.29%).
A weaker dollar is weighing on oil prices, which fell around 8% last week amid fears about demand.
A barrel of Brent oil increased by 1.32% to $79.61, a barrel of American light oil (West Texas Intermediate, WTI) increased by 1.41% to $74.81.
(Writing by Claude Chendjou, Editing by Kate Entringer)