China relief outweighs inflation concerns

PARIS (Reuters) – Wall Street is expected to rise sharply and European stocks rose sharply mid-session on Tuesday as the dollar retreats and investors move away from government bonds, the latest news from China favors a recovery of appetite for risky assets, even if they do. Don’t hide the risks associated with inflation and interest rates.

Futures contracts on major New York indices point to a 1.47% rise for the Dow Jones, 1.55% for the Standard & Poor’s 500 and 1.88% for the Nasdaq.

In Paris, the CAC 40 gained 1.41% to 6,437.11 points around 11:00 GMT, the highest since May 5. In London, the FTSE 100 is up 0.94% and in Frankfurt, the Dax is up 1.53%.

The EuroStoxx 50 index rose 1.59%, the FTSEurofirst 300 1.48% and the Stoxx 600 1.48%.

Shanghai authorities have lifted some of the strict health restrictions put in place in recent weeks in a bid to stem the resurgence of the COVID-19 outbreak, after three consecutive days with no new cases outside the quarantine zones.

At the same time, according to several sources, the Chinese vice-premier, Liu He, would meet during the day with leaders of the high-tech sector, information that maintains the hope of a reduction in regulatory pressure on the sector.

The CSI 300 index of Chinese large caps closed the session up 1.25% and in Hong Kong, the techs index jumped 5.78%.

In Europe, the employment figures in France and the UK and the slight upward revision to growth in the euro zone in the first quarter were generally well received.

But if optimism prevails, concerns about growth and inflation remain high on the agenda, especially as economic indicators released on Monday in China and the United States fueled fears of a sharp slowdown in activity.

Markets will therefore be watching US retail sales and industrial production figures ahead of the open on Wall Street, as well as public interventions by various Federal Reserve officials, including Chairman Jerome Powell. , starting at 18:00 GMT.

VALUES IN EUROPE

All the major sectors of the European rating evolve in green at noon, with the biggest rises being the raw materials compartment, whose Stoxx index gains 3%, and that of high technologies (+2.80%).

In Paris, Engie takes 5.97% at the head of the CAC 40 after raising its annual profit targets and announcing an agreement with the Russian giant Gazprom to pay for its gas purchases.

Daimler Truck (+7.21%) and Caixabank (+3.79%) also benefit from the results hailed by analysts.

Lagging behind the market, Vodafone (-0.13%) is neglected, leaving its forecast for the year 2023 below the consensus.

VELOCITY

The return of investors to equities hurts government bonds, which translates into a rise in yields: that of ten-year US Treasury bonds takes four basis points to 2.924% and that of two years plus six points to 2.6319%.

In the euro zone, this movement, already marked from the beginning of the session, intensified after the statements of Klaas Knot, governor of the Dutch central bank, who judges that a rate hike of a quarter of a point in July is “realistic “. but he doesn’t rule out a half-point increase.

The yield of the ten-year German Bund thus takes more than eight points to 1.021%.

Money market futures are now pricing in a full 105 basis point increase in European Central Bank (ECB) rates by the end of the year.

CHANGES

Klaas Knot’s remarks also benefit the euro, which appreciated 0.81% against the dollar to 1.0515 and returned to its level of last Wednesday.

On the contrary, the greenback continues, against the other major currencies, the fall that began on Friday after its maximum of 20 years: the index that allows to follow its fluctuations against a reference basket yields 0.62%, more 1.4% below its peak on Friday.

PETROLEUM

The price of crude reached its highest level in seven weeks, still buoyed by the prospect of a European Union embargo on Russian oil despite persistent opposition from Hungary and by hopes of a resumption of Chinese demand.

Brent crude rose 0.77% to $115.12 a barrel after touching 115.53, its highest level since March 28, and US light crude (West Texas Intermediate, WTI) rose 0.71% to $115.01 after hitting a high of $115.43.

(Written by Marc Angrand)