RISE IN SIGHT IN EUROPE BUT CONCERNS HAVE NOT CHANGED
PARIS (Reuters) – The main European stock markets are expected to rise on Wednesday after a slightly better-than-expected Chinese indicator, but this first session of June, like the previous ones, should be driven by questions about the slowdown in economic growth and the impact of inflation on the monetary policy of the major central banks.
Index futures are pointing to increases of 0.34% for the CAC 40 in Paris, 0.39% for the Dax in Frankfurt, 0.38% for the FTSE 100 in London and 0.34% for the EuroStoxx 50.
European stocks ended lower on Tuesday after a session marked by both the new euro-zone inflation record (8.1% over one year) and the European agreement to cut Russia’s oil imports, fueling a further rise in the price could of a barrel. The month of May ended with a loss of 1.56% for the broad Stoxx 600 index and 0.99% for the CAC 40.
In Asia, the Caixin-S&P Global PMI for Chinese manufacturing activity rose to 48.1 in May from 46.0 in April, while the Reuters consensus put it at 48.0, reflecting a less pronounced decline as Shanghai this Wednesday his return to a “normal” life begins after two months in prison.
In Europe, the final reading of manufacturing PMI indices expected in the morning should confirm slowing growth, ongoing tensions in supply chains and the trend of sustained rising prices.
The latter continues to weigh on private household consumption: In Germany, retail sales fell by 5.4% in April, while economists polled by Reuters expected a limited decline of 0.2%.
Markets will also be watching the results of the ISM survey of manufacturing activity in the United States and those of the ADP on private employment, a prelude to the Labor Department’s monthly report expected on Friday.
They will also study the Bank of Canada’s monetary policy statement, which was due to announce another half-point hike to 1.5% of its benchmark interest rate.
“Markets are expecting rate hikes in June in the UK, US, Sweden, Australia and Canada,” said Kit Juckes, an analyst at Societe Generale. “The more markets focus on inflation numbers and central bank decisions, the more likely the start of summer will be choppy in terms of risk appetite and a boost to the dollar.”
ON WALL STREET
The New York Stock Exchange closed lower on Tuesday after an indecisive session marked by swings in oil prices and the market’s reaction to comments from a Federal Reserve official that suggested a longer-than-expected tightening of monetary policy in the United States was.
The Dow Jones Index fell 0.67% or 222.84 points to 32,990.12, the Standard & Poor’s 500 lost 26.09 points (-0.63%) to 4,132.15 and the Nasdaq Composite lost 49.74 points (-0.41%) to 12,081.39.
After last week’s rally ended a long string of weekly declines, the S&P 500 and Dow ended May with tiny gains, while the Nasdaq posted a monthly decline of 2.05%.
Futures are pointing to a slightly higher open for now.
On the Tokyo Stock Exchange, the Nikkei index rose 0.65%, driven by the auto sector, after a study by JPMorgan predicted record annual profits for the main Japanese manufacturers: Toyota took 3.53%, Nissan 7.77% and Honda 4.3 % a.
In China, the Shanghai SSE Composite fell 0.35% and the CSI 300 0.42%, while in Hong Kong the Hang Seng fell 0.84%, weighed down by technology stocks (-1.99%).
June started well for the dollar, which gained 0.24% against a reference basket and hit 129.28 against the yen (+0.40%), its highest level since May 18th.
The euro, meanwhile, fell 0.21% against the greenback to 1.071, continuing the decline that started after Monday’s one-month high of 1.0787.
The US currency continues to benefit from the rise in Treasury yields: the 2-year, which is particularly sensitive to interest rate expectations, rose almost 8 basis points on Tuesday, limiting its decline to 18.4 points for the whole of May. IT is showing up 2.5626% on exchanges in Asia.
In Europe, the German 2-year was almost flat at 0.502% in early trade, while the 10-year fell to 1.108%.
The oil market is slightly higher, still supported by the prospect of an almost complete halt to imports of Russian crude oil from the European Union and the end of lockdowns in Shanghai.
Brent rose 0.48% to $116.15 a barrel and US light oil (West Texas Intermediate, WTI) rose 0.51% to $115.25.
However, the increase is limited by information from The Wall Street Journal that several member states of the Organization of the Petroleum Exporting Countries (OPEC) are considering suspending Russia from collective supply management contracts, which could prompt some countries to increase production.
(Writing by Marc Angrand, with Tom Westbrook in Singapore, Editing by Kate Entringer)