There is some increase in visibility in Europe, but London should be an exception
By Laetitia Volga
PARIS (Reuters) – Major European stock markets, excluding London, should open slightly higher on Thursday after being chastised by questions about the Federal Reserve’s monetary policy a day earlier, despite geopolitical tensions surrounding Ukraine.
Early indicators available show a 0.26% drop for the CAC 40 in Paris, a 0.47% drop for the Dax in Frankfurt, a 0.14% drop for the FTSE in London and a 0.26% gain for the EuroStoxx 50.
Wednesday’s announcement of stronger-than-expected growth in US retail sales has some observers questioning the Fed’s strategy, which may not let up given the strength of consumption.
Several institution officials, including Gov. Christopher Waller and San Francisco Fed President Mary Daley, have also hinted that there is still a long way to go in terms of raising interest rates.
“These comments, like the consumer numbers, do not encourage those hoping for an imminent Fed turnaround,” National Australia Bank economist Ted Nugent said in a note.
The day’s session is set to be enlivened by, among other things, the British Chancellor of the Exchequer’s presentation of a budget and tax plan designed to make people forget the chaotic experience of the previous government.
On the macroeconomic side, investors will note the final figures on the evolution of prices in the euro zone last month and the “Philly Fed” index for November.
Markets will also follow what is happening on the Ukrainian side. NATO estimated on Wednesday that an explosion in Poland near the Ukrainian border was likely caused by a missile fired from a Ukrainian air defense system, dismissing fears of a military escalation in Europe.
ON WALL STREET
The New York Stock Exchange ended lower on Wednesday as a mediocre outlook from Target (-13.14%) fueled investor concerns about the retail sector.
The Dow Jones index decreased by 0.12% or 39.09 points and reached 33,553.83 points. The broader Standard & Poor’s 500 lost 32.94 points, or 0.83%, to 3,958.79, while the Nasdaq Composite fell 174.75 points (-1.54%) to 11,183.659.
“The bottom line is Target’s results and what they mean for retail sales and consumer spending in general. I think that set the tone for the market,” commented Chuck Carlson of Horizon Investment Services.
Micron fell 6.7% after it said it would reduce memory chip shipments and capital spending. The Philadelphia Semiconductor Index lost 4.3%.
Futures contracts indicated an increase of 0.22% for the Dow Jones, 0.33% for the Standard & Poor’s-500 and 0.4% for the Nasdaq.
On the Tokyo Stock Exchange, the Nikkei fell 0.35% as semiconductor makers Tokyo Electron (-2.95%) and Advantest (-3.14%) fell, while American Micron’s announcement raised questions about a slowdown in the sector.
The economic impact of the COVID-19 epidemic in China remains a major source of concern for investors: the CSI 300 index fell 1.04%, while the Shanghai SSE Composite fell 0.64%.
The National Health Commission (NHC) recorded 23,276 new infections on Wednesday against 20,199 a day earlier.
The dollar rose by 0.08% against the basket of international currencies, while the euro fell slightly to $1.0385 (-0.07%).
In the government bond market, the yield on ten-year US Treasury bonds rose more than two basis points to 3.7101%.
On Wednesday, retail sales hit a six-week low as investors expected the Fed to continue raising interest rates, which could hurt economic growth.
The oil market continues to trend lower as geopolitical tensions ease, while rising COVID-19 cases in China add to demand concerns.
Brent oil fell 0.98% to $91.95 a barrel, US light oil (West Texas Intermediate, WTI) fell 1.3% to $84.48.
(Editing by Matthieu Protard)