Inflation and rates still drive the trend



by Marc Angrand

PARIS (Reuters) – Wall Street is expected to fall and European stock markets, excluding London, retreat in mid-session Monday, as rising energy prices continue to fuel fears about inflation while rising yields bond once again validates the scenario of monetary tightening.

Futures contracts on major New York indices are signaling an opening down 0.26% for the Dow Jones, 0.53% for the Standard & Poor’s 500 and 0.76% for the Nasdaq.

In Paris, the CAC 40 lost 0.42% to 6,532.67 points around 10:50 GMT and in Frankfurt, the Dax fell 0.51% while in London, the FTSE 100 took 0.18%, thanks to mining stocks and oil.

The EuroStoxx 50 index is down 0.58%, the FTSEurofirst 300 down 0.29% and the Stoxx 600 down 0.49%.

The volumes of exchanges on Wall Street could be reduced on this “Columbus Day”, a public holiday in the United States (the American bond and foreign exchange markets will remain closed), especially since the main meetings of the week for investors are expected from Wednesday, with the consumer price figures (CPI), the report of the last meeting of the Federal Reserve and the start of publications of large American listed groups.


The risk of energy shortages continues to boost the price of a barrel: that of Brent rose 2.21% to 84.21 dollars a barrel, the highest since October 2018, and that of US light crude (West Texas Intermediate, WTI ) 2.79% to 81.56, the highest since the end of 2014.

Gas futures prices on the European market have erased their losses at the start of the session to start rising again and some contracts posted jumps of more than 10% at the end of the morning.


The increasingly clear prospect of a shift in monetary policies in favor of a hike in rates with the economic recovery continues to encourage a rise in yields: that of the ten-year German Bund, at -0.112%, is at its highest since May, just like its French equivalent, at 0.227%.

And the evolution of the money market shows that investors now factor in a 100% probability of a 10 basis point rate hike by the European Central Bank (ECB) by the end of 2022.

Speculation over rates in Europe was reignited by statements this weekend by two Bank of England (BoE) officials that inflation was worrisome and that consumers needed to prepare for a sharp rise interest rates.


This rise in rates benefits, among other things, banking stocks: the European Stoxx index for the sector gained 0.66% and returned to its level of February 2020, before the fall triggered by the coronavirus crisis.

In Paris, BNP Paribas returns 0.81%, Société Générale 0.73% and Crédit Agricole 0.37%.

The raw materials (+ 2.41%) and energy (+ 0.99%) compartments reflect the rise in the prices of basic materials and hydrocarbons: ArcelorMittal gains 4.6%, BHP Group 2.93%, TotalEnergies 1.58%.

The CGG oil services group soars by 16.61% after prospects deemed encouraging.

In the news of mergers and acquisitions, Carrefour, which took nearly 1% in the first exchanges, now drops 1.53% after the end of discussions with Auchan.

The distribution sector as a whole suffers after the warning of the British Asos, whose price falls by 13.27%, notes Nicolas Champ, analyst at Barclays.


CHANGES The dollar continues to benefit from expectations linked to the Fed: if it appreciates marginally against the euro, which is trading around 1.1560, the greenback is at its highest for nearly three years against the yen , more sensitive to variations in yield spreads.

The pound is benefiting from statements by Bank of England officials on inflation and rates.

(Report by Marc Angrand, with Anait Miridzhanian, edited by Blandine Hénault)

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