Europe closes higher, Wall Street mid-session

Traders work in the IG index trading room

Traders work in the IG index trading room

by Augustine Turpin

European stock markets ended Friday as Wall Street slipped into negative territory midway through the session amid sluggish trading on the final trading day of the year, optimism over a looming decline in bond rates. The major central banks continue to drive the markets, in the absence of other indicators.

In Paris, the CAC 40 ended with an increase of 0.11% to 7,543.18 points. The British Footsie takes 0.14% and the German Dax 0.30%.

The EuroStoxx 50 index gained 0.14%, the FTSEurofirst 300 0.2% and the Stoxx 600 0.15%.

On Wall Street, trading was muted in the final session of an overall positive year, with the benchmark S&P 500 hovering around an all-time high.

The S&P is up nearly 25% this year thanks to a massive rally in large-cap technology groups, while the STOXX 600, at its 23-month high, is on course for a year-to-date gain of nearly 13%, driven by a surge in November and December.

“In 2024, we have absorbed a large part of the expected returns. The positive market momentum is clearly associated with declining returns and now the question is how long this trend can continue,” said analyst Samy Chaar Lombard Odier.

Future earnings are “probably more subdued” than they were at the start of November, added Samy Chaar, who suggests that if long-term US interest rates stabilize around 3.5% or 4%, there is “little risk of a big turnaround” and that continued corporate earnings they could add “a few percent up”.

WALL STREET

At the close in Europe, the Dow Jones lost 0.33%, the Standard & Poor’s 500 -0.49% and the Nasdaq Composite -0.77%.

In terms of values, shares of Fisker rose 13.6%, with the electric car maker reporting a more than 300% quarter-over-quarter increase in its shipments.

CHANGES

The dollar edged up (+0.02%) against a basket of peers, but is still set to end 2023 in the red after two consecutive years of gains, driven by investors’ hopes of Fed rate easing, while the euro lost 0. 01% to $1.1061.

“Markets expect a (rate) cut earlier in the United States and are less certain that the European Central Bank (ECB) will cut its rates so quickly, which is why the dollar is very soft,” commented Niels Christensen, an analyst at Nordea. .

“Risk appetite is also positive, which is another negative factor for the dollar,” he added.

RATE

Eurozone bond yields are falling, continuing a trend from the last two months of the year, when inflation slowed more than expected and the European Central Bank signaled that the rate hike cycle is almost definitely over, prompting investors to bet on another big rate cut. year.

The 10-year German bond yield rose 8.3 basis points to 2.023%.

According to UBS analyst Emmanouil Karimalis, Friday’s moves are likely to be a “correction” after the mass rally.

“Personally, I’m a bit skeptical about why (yields) are expected to go down from now,” he said, noting that governments will sell a lot of debt next year and that January is typically a busy time for them. emissions, which could put pressure on yields.

In the United States, the 10-year Treasury yield rose 0.7 basis points to 3.8567%.

“The market appears to be headed for a flattening to the downside, with little real activity as many investors are still away during the holidays,” said Gennaviy Goldberg, an analyst at TD Securities.

OIL

Oil prices are rising but are expected to fall by around 10% by 2023 after two years of growth, with geopolitical concerns, production cuts and measures taken by central banks to control inflation leading to significant price swings.

Brent rose 0.19% to $77.30 a barrel, US light crude (West Texas Intermediate, WTI) rose 0.04% to $71.8.

(Written by Augustin Turpin, Editing by Kate Entringer)

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