Withdrawal in sight in Europe, the Chinese recovery disappoints

FOLDING IN SIGHT IN EUROPE, THE CHINESE RECOVERY IS DISAPPOINTING

by Marc Angrand

PARIS (Reuters) – Major European stock markets are expected to fall on Monday at the opening after a series of lower-than-expected Chinese indicators that suggest a slowdown in the recovery of the world’s second-largest economy and underline the risks associated with the spread of the variant Coronavirus delta.

Index futures suggest a decline of 0.43% for the CAC 40 in Paris, 0.57% for the Dax in Frankfurt, 0.77% for the FTSE 100 in London and 0.67% for the EuroStoxx 50.

The broad European Stoxx 600 index recorded its tenth consecutive session of growth on Friday, unprecedented since 2006, while the CAC 40 rose to less than 1% of its all-time high of September 2000, thanks to the good health of companies listed and hopes for continued global recovery.

But the latter took a hit on Monday with figures below expectations for industrial production and retail sales in China in July (+ 6.4% over one year for the first, + 8.5% for the second) , especially since the recent resurgence of COVID-19 cases may weigh on activity.

“China is in the process of withdrawing its monetary and budgetary support, which should weigh on the growth in demand and on the performance of the whole region until the end of this year,” warns Bruce Kasman, economist at JP Morgan.

To these economic concerns are added the geopolitical tensions linked to the seizure of power by the Taliban in Afghanistan, after the collapse this weekend of the regime supported for 20 years by the West, whose repercussions on neighboring countries are still difficult to assess.

Investors also remain faced with concerns about the development of US monetary policy in the coming months, which last week’s US inflation figures have only partially assuaged.

The week which begins will be animated among other things by the publication Wednesday of the minutes of the meeting of July of the Federal Reserve, likely to give new indications on the calendar of the “tapering”, the first stage of the normalization of its policy.

A WALL STREET

The New York Stock Exchange ended almost stable on Friday, the announcement of a marked deterioration in consumer confidence having weighed on the trend while the increase of Walt Disney (+ 1%) after its results had supported the indices at the beginning of sitting.

The Dow Jones gained 0.04%, or 15.53 points, to 35,515.38 points, the Standard & Poor’s 500 gained 7.18 points, or 0.16%, to 4,468.01 and the Nasdaq Composite advanced for its part, 6.64 points (+ 0.04%) to 14,822.90.

The University of Michigan consumer confidence index fell to 70.2 in August as an initial estimate, the lowest since December 2011, while the Reuters consensus gave it unchanged at 81.2.

Index futures are currently suggesting a decline of around 0.3%.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index ended the day down 1.62%, weighed down by the health situation, Chinese indicators and the appreciation of the yen, which penalizes large exporters like Toyota (- 1.53%) or Sony (-2.24%).

The market thus ignored the better than expected figures for Japanese gross domestic product (GDP), which show growth of 1.3% at an annualized rate for the period April-June, while the Reuters consensus gave it to 0.7 % only.

In China, the CSI 300 was stable as the Shanghai SSE Composite rose 0.12%, benefiting from hopes of further support measures for the economy after the People’s Bank of China injected 600 billion yuan of liquidity in the financial system, an amount greater than expected.

CHANGES / RATES

The dollar is virtually unchanged against other major currencies (+ 0.06%) and remains close to the low of a week hit Friday after the first results of the Michigan confidence index.

The euro is trading around $ 1.1790 after briefly crossing 1.18 on Friday.

In the bond market, the yield of ten-year Treasury bills, which also suffered the blow of the Michigan survey, continues to decline to 1.2567%, against more than 1.36% at the start of the session on Friday .

In Europe, that of the ten-year German Bund fell just over a basis point in early trading to -0.48%.

OIL

The oil market fell for the third session in a row, new health restrictions decided by several countries in an attempt to curb the Delta variant weighing on the outlook for demand.

Brent dropped 1.46% to $ 69.56 per barrel and US light crude (West Texas Intermediate, WTI) fell 1.55% to $ 67.38.

(With Wayne Cole in Sydney, edited by Blandine Hénault)

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