Fear of a recession no longer leaves investors (updated)

PARIS (Reuters) – The main European stock markets are expected to fall on Thursday, as investors remain concerned above all about the risk that the accelerated tightening of monetary policy will stifle growth in the United States.

Index futures suggest a drop of 0.44% for the CAC 40 in Paris, 0.33% for the Dax in Frankfurt, 0.35% for the FTSE 100 in London and 0.41% for the EuroStoxx 50.

U.S. bond yields, the dollar and oil fell on Wednesday as Wall Street closed slightly lower after the Senate hearing of Federal Reserve Chairman Jerome Powell, during which he acknowledged that the recession was “certainly a possibility” even if it was not the objective of the central bank.

The risk of seeing the rapid rise in US interest rates, deemed necessary to regain control of inflation, lead to a contraction of the leading economy is in any case deemed increasingly likely by a growing number of major banks. investment: “after Deutsche Bank, Nomura or Goldman Sachs, it is now Citigroup’s turn to predict a recession”, notes John Plassard at Mirabaud Securities.

For its part, Pimco, one of the main bond investors in the world, considers this risk “high” for the next two years and also mentions that of “financial accidents”.

While awaiting Jerome Powell’s second hearing in Congress, this time in the House of Representatives, the upcoming session will give investors an opportunity to measure the evolution of the global economy since it will be punctuated by the first results of the S&P Global PMI surveys as well as weekly jobless claims figures in the United States.

In Japan, the “flash” manufacturing PMI is at its lowest since February and Toyota has lowered its July production forecast due to shortages of semiconductors.

AT WALL STREET

The New York Stock Exchange ended slightly lower on Wednesday after a hectic session, punctuated by the hearing of Jerome Powell in the Senate.

The Dow Jones index fell 0.15%, or 47.12 points, to 30,483.13 the Standard & Poor’s 500 lost 4.9 points, or 0.13%, to 3,759.89 and the Nasdaq Composite lost dropped 16.22 points (-0.15%) to 11,053.08.

They pared their losses after Jerome Powell’s statements, with the Nasdaq even spending time in positive territory. A see-saw development that reflects investors’ questions about the risks posed to growth by the rate hikes scheduled by the Fed.

Defensive stocks such as real estate, health care or utilities have garnered the largest increases in the S&P. The energy sector (-4.19%), on the other hand, suffered from the drop in crude oil prices.

Futures on major indices suggest a slightly lower open for now.

IN ASIA

At the Tokyo Stock Exchange, the Nikkei index, which rose at the start of the session, briefly went into the red to end on a symbolic increase of 0.08%.

Of note, Toshiba’s 3.54% rise after Reuters reports that a group of investors are preparing a takeover bid.

In China, the Shanghai SSE Composite and the CSI 300 gained 1.43%, benefiting from the rebound in technology stocks the day after President Xi Jinping announced the green light to a development plan for the payments and “fintech” sector. “. In Hong Kong, the high technology index climbed 2.67%.

EXCHANGES/RATES

The dollar is hesitant against the other major currencies (+0.01%) after three sessions of decline in a row, a consequence of the fall in yields on Treasury bonds.

The euro is trading at 1.0559 and the yen at 135.82 after a 24-year low set on Wednesday at 136.71.

The yield on ten-year Treasury bills is virtually flat in Asian trading at 3.0757%; it fell in session Wednesday to 3.124%, its lowest level in two weeks, in response to comments by Jerome Powell.

In Europe, the ten-year German is up slightly in the very first trade to 1.641%, the day after a sharp decline favored by the decline in safe haven assets.

OIL

Crude prices continue to fall, still affected by rising fears of a recession, which are affecting demand prospects.

Brent fell 1.13% to 110.48 dollars a barrel and US light crude (West Texas Intermediate, WTI) 1.37% to 104.74 dollars. Both have already lost around 3% on Wednesday and are at their lowest level since mid-May.

Many US and European funds are closing their positions as the end of the second quarter approaches, which also weighs on the trend, notes an analyst.

METALS

The price of copper fell to its lowest level in 16 months at 8,564.5 dollars a ton, affected by both recession fears in the United States and a new increase in the number of COVID cases in mainland China, two threats to demand.

(Written by Marc Angrand; editing by Matthieu Protard and Kate Entringer)