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Rise in sight in Europe but concerns do not change

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 should be driven like the previous ones by questions about the slowdown in economic growth and the impact of inflation on the monetary policies of the major central banks.

Index futures suggest a rise 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 in the red on Tuesday after a session marked by both the new inflation record in the euro zone (8.1% over one year) and the European agreement on the reduction of oil imports Russia, which risks encouraging a further rise in the price of a barrel. The month of May thus ended with a decline of 1.56% for the broad Stoxx 600 index and 0.99% for the CAC 40.

In Asia, the Caixin-S&P Global PMI on Chinese manufacturing activity rose to 48.1 in May from 46.0 in April, while the Reuters consensus gave it at 48.0, reflecting a contraction less marked as Shanghai begins its return to a “normal” life this Wednesday after two months of confinement.

In Europe, the final figures of the PMI manufacturing indices expected in the morning should confirm a slowdown in growth, the persistence of tensions in the supply chains and the trend of a sustained rise in prices.

The latter also continues to weigh on household consumption: in Germany, retail sales fell by 5.4% in April while economists polled by Reuters expected a decline limited to 0.2%.

The markets will also watch the results of the ISM survey on manufacturing activity in the United States and those of ADP on private employment, a prelude to the monthly report from the Labor Department expected on Friday.

They will also study the monetary policy statement from the Bank of Canada, which should announce a further increase by half a point to 1.5% of its key rate.

“The markets are anticipating rate hikes for June in the United Kingdom, the United States, 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 buoyant for the dollar.”

AT WALL STREET

The New York Stock Exchange ended lower on Tuesday, after an indecisive session marked by swings in oil prices and the market reaction to statements by a Federal Reserve official suggesting a tightening of monetary policy more extended than expected in the United States.

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 fell 49.74 points (-0.41%) to 12,081.39.

After last week’s rally ended a long series of weekly declines, the S&P-500 and the Dow ended May with a tiny gain while the Nasdaq shows a monthly decline of 2.05% .

Futures for now point to a slightly higher opening.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended up 0.65%, driven by the automotive sector after a JPMorgan study predicting record annual profits for the main Japanese manufacturers: Toyota took 3.53%, Nissan 7.77% and Honda 4.3%.

In China, the Shanghai SSE Composite lost 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%) .

EXCHANGES/RATES

The month of June started well for the dollar, which appreciated by 0.24% compared to a reference basket and reached its highest level since May 18 against the yen (+0.40%) at 129, 28.

The euro, meanwhile, fell 0.21% against the greenback at 1.071, continuing the decline that began after Monday’s one-month high at 1.0787.

The US currency continues to benefit from the rise in Treasury bond yields: the two-year, which is particularly sensitive to expectations of changes in key rates, took nearly eight basis points on Tuesday, limiting its decline over the whole month. May to 18.4 points. IT is displayed at 2.5626% in exchanges in Asia.

In Europe, the two-year German was almost stable in early trading at 0.502%, while the ten-year fell to 1.108%.

OIL

The oil market is up slightly, still supported by the prospect of an almost total halt to imports of Russian crude from the European Union and by the end of confinement in Shanghai.

Brent gained 0.48% to 116.15 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.51% to 115.25 dollars.

The rise is, however, limited by information from the Wall Street Journal according to which several member states of the Organization of the Petroleum Exporting Countries (OPEC) are considering suspending Russia from collective supply management agreements, which could encourage some countries to increase their production.

(Writing by Marc Angrand, with Tom Westbrook in Singapore, editing by Kate Entringer)

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