European stock markets expected to rise, reassured by China (updated)

by Laetitia Volga

PARIS (Reuters) – The main European stock markets are expected to rise at the opening on Monday thanks to the initiatives of the central bank of China to support a slowing economy.

Futures suggest that the Paris CAC 40 could gain 0.4% at the open, the Dax in Frankfurt would take 0.66%, the FTSE in London would advance by 0.32% and the EuroStoxx 50 by 0.65 %.

The unexpected announcement of two interest rate cuts by the People’s Bank of China (PBOC) to support the domestic economy should support equity markets at the open.

BPC said it was lowering the rate on its medium-term credit facility by 10 basis points to 2.85% and the interest rate on its reverse repurchase agreements to 2.10%.

“As long as the BPC lowers interest rates enough, its determination would help lift market and business sentiment,” Citigroup said.

The slower than expected Chinese economic growth in the fourth quarter is also a good surprise. Gross domestic product (GDP) grew by 4.0% year on year in the last three months of 2021, a figure above the Reuters consensus at 3.6% but the weakest recorded in a year and a half.

Over the past year as a whole, China’s GDP grew by 8.1%, again a figure above the consensus and the government’s objective.

Other statistics released on Monday show that retail sales growth (+1.7%) fell short of expectations in December, at the slowest pace since August 2020, while industrial production rose last month by 4 .3% over one year, doing better than the Reuters consensus.

The week will be animated, among other things, by results from major companies, including Goldman Sachs, Morgan Stanley, ASML, Netflix and Richemont.

Investors will also be watching the Bank of Japan’s monetary policy meeting, final eurozone inflation data and Thursday’s release of the minutes of the European Central Bank’s latest monetary policy meeting.

The session of the day should remain fairly calm in the absence of Wall Street, closed for Martin Luther King Day, and major indicator on the agenda.

VALUES TO FOLLOW:

AT WALL STREET

Friday, it ended in scattered order, the Dow Jones index having been hampered by the financial sector after the publications deemed disappointing by the major American banks kicking off the quarterly results season for companies in the United States.

The Dow Jones fell 0.56% to 35,911.81 points, the S&P-500 edged down 0.08% to 4,662.85 points and the Nasdaq Composite gained 0.59% to 14,893.75 points.

Over the week, the Dow lost 0.9% and the S&P-500 and the Nasdaq both lost 0.3%.

JP Morgan lost 6.15%, Citigroup 1.25% and BlackRock dropped 2.2% after the publication of their fourth quarter accounts.

Against this trend in the financial sector, the Californian bank Wells Fargo advanced by 3.7% after posting a quarterly profit better than expected.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei ended up 0.74%, supported by stocks in the energy and semiconductor sectors.

In Chinese markets, equities benefited from faster-than-expected year-on-year GDP growth in the fourth quarter and an unexpected drop in the People’s Bank of China’s one-year medium-term lending facility (MLF) rate. China (BPC), at 2.85%.

Shanghai’s SSE Composite gained 0.58% and mainland China’s major cap CSI 300 gained 0.86%.

EXCHANGES/RATES

The index measuring the fluctuations of the dollar against other reference currencies is stable after rising 0.4% on Friday on expectations of future monetary tightening in the United States.

The euro evolves without much change, at 1.1425 dollar

On the bond market, the ten-year German Bund yield gained two basis points, to -0.028%, in early trading.

OIL

Oil prices are up on optimism about the limited impact on demand for the Omicron variant.

The barrel of Brent gained 0.59% to 86.57 dollars after a peak since October 2018 at 86.71 and American light crude rose 0.81% to 84.5 dollars having registered a highest in two months at 84, 78.

(Laetitia Volga, edited by Blandine Hénault)