Drop in sight in Europe, fears of a return recession


The Palais Brogniard, former Paris Stock Exchange

by Claude Chendjou

PARIS (Reuters) – The main European stock markets are expected to fall on Thursday at the opening in the wake of the close of Wall Street the day before, the sharp deterioration of indicators in the United States, in particular that of retail sales, having revived the concerns about a hard landing for the US economy.

Index futures suggest a decline of 0.56% for the CAC 40 in Paris, 0.51% for the Dax in Frankfurt, 0.47% for the FTSE 100 in London and 0.55% for the EuroStoxx 50.

The session could once again be dominated by central banks. A monetary policy decision from the Bank of Norway is expected while Christine Lagarde, President of the European Central Bank (ECB), is due to speak at 10:30 GMT at the World Economic Forum in Davos.

On Thursday, the successive declarations of James Bullard and Loretta Mester, two officials of the American Federal Reserve (Fed), on the need to raise interest rates above 5% in the United States dampened the enthusiasm of investors about a lull in the cost of credit.

These declarations relegated to the background the fall in producer prices in December in the United States and reinforced concerns about the evolution of the economic situation across the Atlantic since retail sales in the country contracted more sharply than expected. , raising the specter of a recession. Especially since US industrial production fell more markedly than expected last month.

“Falling retail sales and industrial production add to the subject of the economy slowing and heading into recession in 2023. This pushes back the soft landing scenario that has dominated markets since January” , comments Tapas Strickland, head of economics at National Australia Bank.

At the same time, corporate financial publications continue with mixed success, particularly in the banking sector. In this respect, the results of Netflix, expected after the closing, will constitute a test for the sector of new technologies. Before that, consumer staples giant Procter & Gamble will have delivered its fourth quarter accounts.

AT WALL STREET

The New York Stock Exchange ended lower on Wednesday after the release of weak economic data and statements from Fed officials in favor of a further hike in interest rates.

The Dow Jones index fell 1.81%, or 613.89 points, to 33,296.96 points.

The broader S&P-500 lost 62.11 points, or 1.56%, to 3,928.86 points.

The Nasdaq Composite fell for its part by 138.1 points (-1.24%) to 10,957.01 points.

Microsoft has also announced the loss of 10,000 jobs to cope with the cost reductions of its customers in dematerialized computing (“cloud”) and the uncertain economic context.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended down 1.44% at 26,405.23 points and the broader Topix fell 1% at 1,915.62 points.

In China, the Shanghai SSE Composite gained 0.49% and the CSI 300 gained 0.62%.

CHANGES

At foreign exchange, the dollar is virtually stable (-0.07%) against a basket of international currencies.

The Japanese currency is heading higher against the greenback, at 128.14 yen to the dollar, as traders speculate on a March or April adjustment to the ultra-accommodative policy of the Bank of Japan (BoJ) after its unexpected decision the day before opting for the status quo.

The New Zealand dollar fell 0.74% to 0.63975 US dollars after the surprise announcement of the resignation of New Zealand Prime Minister Jacinda Ardern.

The euro is trading at 1.0784 dollars (-0.07%)

RATE

The yield on ten-year US Treasury bills fell nearly five basis points to 3.32%, the lowest since September.

That of the German Bund of the same maturity, which ended Wednesday down eight points, still yields nearly three points, to 1.98%.

OIL

Oil prices are falling again in a context of renewed concerns linked to a recession: the barrel of Brent drops 0.95% to 84.17 dollars and that of American light crude (West Texas Intermediate, WTI) 1.14 % at $78.57.

THE MARKET SITUATION:

(Some data may show a slight shift)

(Written by Claude Chendjou, edited by Kate Entringer)

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