Stock decline in sight in Europe after the fall of Wall Street – 19/05/2022 at 07:58


EUROPEAN STOCK MARKETS ARE EXPECTED TO FALL

by Laetitia Volga

PARIS (Reuters) – Major European stock markets are expected to fall on Thursday as they open after the fall of Wall Street the day before, amid serious concerns about the impact, especially on businesses, of the level of inflation and the interest rate hikes by the central bank.

The first available indications point to a decline of 0.61% for the Paris CAC 40, 0.65% for the Dax in Frankfurt, 0.56% for the FTSE in London and 0.6% for the EuroStoxx 50.

European equities fell more than 1% on Wednesday as lingering concerns about the global economy wiped out relief from an improving health crisis in China that had supported stocks the day before.

The pullback was much more pronounced on Wall Street, where the S&P 500 and Dow Jones experienced their worst session since June 2020, amid fears of a significant economic slowdown as US Federal Reserve Chairman Jerome Powell expressed his determination to curb inflation.

Rising costs are not without consequences for businesses: US retail group Target snapped up Wednesday after its poor results, citing delivery difficulties and rising prices, concerns that tie in with those of its rival Walmart the day before.

“Tuesday’s recovery was too optimistic (…) It has to be said that inflation concerns have never gone away since the start of the year’s ‘out of control’ situation,” said Hebe Chen, an analyst at IG.

VALUES TO FOLLOW:

AT WALL STREET

On the New York Stock Exchange, the Dow Jones index fell 3.57% to 31,490.07 points, the S&P 500 lost 4.04% to 3,923.68 points and the Nasdaq Composite fell 4.73% to 11,418, 15 points.

Target plunged 25% after reporting quarterly profits had been halved on rising prices and warned of the risk of further margin deterioration.

It was the worst session since the ‘Black Friday’ crash of October 19, 1987, and the group’s market cap was cut by about $25 billion.

Building permits hit a five-month low in April, pointing to a slowdown in the housing market as mortgage rates rise.

Futures contracts open this Thursday in scattered order, but with small gaps.

IN ASIA

In the wake of Wall Street, the Nikkei fell 1.69% in Tokyo.

Mainland China stock markets fell slightly, but Hong Kong’s Hang Seng fell 2.52%, weighed down by Tencent ({0700.HK;DSPLY_NAME}%) announcing that its quarterly profit had halved.

RATE

In the bond market, government bond yields are rising again, having fallen the day before towards safe-haven assets.

The yield on ten-year Treasuries is up by more than two basis points – after losing more than 11 on Wednesday – to 2.9058 %.

CHANGES

Safe haven currencies are depreciating after strong gains in the previous session amid mounting concerns about global growth.

The dollar fell 0.17% against a basket of reference currencies and the yen lost 0.47% against the greenback.

The European single currency, in turn, costs 0.26% to $1.0493.

OIL

The oil market is on an upward trend as fears of insufficient global supplies take precedence over fears of slowing economic growth.

In addition, the US Energy Information Administration (EIA) announced a decline in crude inventories in the United States last week, while an increase was expected.

Brent rose 1.03% to $110.23 a barrel and US light crude (West Texas Intermediate, WTI) 0.38% to $110.01.

KEY ECONOMIC INDICATORS ON THE AGENDA FOR MAY 19

COUNTRY GMT INDICATOR PERIOD PREVIOUS CONSENSUS

US 12:30 PM Unemployment Claims Week at 200,000 203.00

May 14

US 12:30 pm Activity Index “Philly May 16.0 17.6”

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(Written by Laetitia Volga, edited by Nicolas Delame)

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