Slight drop ahead in Europe, COVID-19 concern in China – 21/11/2022 at 08:49


Former building of the Paris Stock Exchange

by Laetitia Volga

PARIS (Reuters) – Major European stock markets were expected to slide slightly early on Monday as investors worried about the economic fallout from the resurgence of the COVID-19 outbreak in China.

Futures recorded a decline of 0.34% for the Paris CAC 40 and the Frankfurt Dax, 0.21% for the London FTSE and 0.33% for the EuroStoxx 50.

Several major Chinese cities have seen a further rise in COVID-19 cases, leading local authorities to introduce new health restrictions, particularly in Beijing where residents of the most populated district are barred from leaving their homes.

Three people died of the disease in the capital over the weekend as China has not recorded a death since late May.

This information is undermining hopes for a quick relaxation of the government’s anti-COVID strategy and stoking fears of a global recession.

On this front, Wednesday’s release of the minutes of the latest Federal Reserve meeting could shed further light on the level at which officials plan to raise interest rates.

Futures markets currently estimate an 80% probability of a 50 basis point hike in the federal funds rate in December and peaking at around 5.0-5.25% in July.

In terms of economic indicators, producer prices in Germany recorded an unexpected drop in October, by 4.2% compared to September.

VALUES TO FOLLOW:

WALL STREET

The New York Stocks closed higher on Friday, as the rise in defensive stocks helped offset the decline in the energy sector, while investors ignored statements deemed rather restrictive by Fed officials Susan Collins and James Bullard on the continued increase in interest rates.

The Dow Jones Index gained 0.59% to 33,745.69 points, the S&P-500 gained 0.48% to 3,965.34 points and the Nasdaq Composite was stable (+0.01%) at 11,146. 06 points.

Futures are currently reporting about 0.3% down.

IN ASIA

The Nikkei gained 0.16%, but the Tokyo Stock Exchange’s flagship index remained below 28,000 points as rising COVID-19 cases in China forced investors to caution.

In China, the CSI 300 Index lost 0.9% and the Shanghai SSE Composite 0.4%. In Hong Kong, the Hang Seng fell 1.99%.

EXCHANGES/FEES

From a currency perspective, developments were supportive of the dollar, up 0.53% against a basket of benchmark currencies.

The euro fell to $1.0263, the single currency moving to its lowest level in ten days.

Recession fears are pushing bond yields lower: 10-year Treasuries lost nearly three basis points to 3.7951% and its German equivalent was at 2.008%.

OIL

The oil market is down, penalized by fears about demand in China and the strength of the dollar.

Brent crude fell by 0.84% ​​to 86.88 dollars a barrel and US light crude (West Texas Intermediate, WTI) by 0.85% to 79.4 dollars.

(Editing by Bertrand Boucey and Kate Entringer)

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