A person rides a bicycle near the Milan Stock Exchange (Italian stock exchange)
by Claude Chendjou
The main European stock markets are expected to fall on Tuesday as the prospect of a truce between the United States and Iran diminishes, Tehran having warned Washington of the risk of a “quagmire”.
According to the first available indications, the Parisian CAC 40 should lose 0.26% at the opening. The Dax in Frankfurt – could fall 0.23%, while the FTSE 100 in London is expected to drop 1.11%. The EuroStoxx 50 index is expected to be stable and the Stoxx 600 down 0.05%.
As in previous sessions, geopolitics should dictate the trend this Tuesday. The United States and Iran both carried out military interventions in the Gulf on Monday, with Washington seeking to regain control over navigation in the Strait of Hormuz while Tehran said it was responding to the American maritime blockade by targeting in particular an oil site in the United Arab Emirates.
This is reflected in the financial markets by a fall in stocks, a jump in oil prices, a surge in bond yields, a strengthening of the dollar, a rise in volatility indices and an appreciation of gold.
“Even if we observe a clear trend towards risk aversion, we have not yet observed movements of a considerable magnitude which would probably accompany… a total escalation of hostilities”, nevertheless tempers Nick Twidale, chief market strategist at ATFX Global.
The season of company publications also continues with, among others, AB InBev, Sabadell, HSBC, Unicredit, Pfizer, Uber and Advanced Micro Devices (AMD).
In terms of macroeconomic indicators, while awaiting the publication on Friday of the official monthly report on American employment, a closely followed indicator to take the pulse of the economy and predict the evolution of key rates, the market will carefully watch the Jolts survey, as well as the ISM services index.
A WALL STREET
The New York Stock Exchange ended lower on Monday as a South Korean ship suffered an explosion in the Strait of Hormuz on the first day of Operation “Project Freedom”, launched by President Donald Trump, which aims to evacuate commercial ships stranded in the Gulf.
The Dow Jones index fell 1.13%, or 557.37 points, to 48,941.90 points. The broader Standard & Poor’s 500 lost 29.37 points, or 0.41%, to 7,200.75 points. The Nasdaq Composite fell – for its part by 46.64 points, or 0.19% to 25,067.801 points
IN ASIA
The Tokyo Stock Exchange remains closed this Tuesday for a public holiday, just like the financial markets in mainland China.
The Hang Seng index in Hong Kong fell 1.11% as growing tensions in the Middle East weighed on investor sentiment.
The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) lost 0.30%.
VALUES TO FOLLOW IN EUROPE:
CHANGES
The dollar advanced 0.18% against a basket of reference currencies, the resumption of hostilities in the Middle East having stimulated demand for safe haven assets.
The yen stabilizes at 157.27 per US dollar, not far from its highest level in two months after several sessions of sharp rises since last Thursday, when sources told Reuters that the authorities had intervened in the foreign exchange market to stop a strong wave of sales.
The Australian dollar fell slightly, by 0.19%, to 0.71535 US dollars, after the increase in key rates decided by the RBA, Australian central bank, for the third time in a row in order to curb inflation.
The euro dropped 0.09%, to 1.1680 dollars, while the pound sterling traded at 1.3518 dollars (-0.10%), both currencies suffering from the appreciation of the green note in a context of risk aversion.
RATE
The yield on ten-year US Treasury bills, which rose seven basis points on Monday to 4.44%, fell slightly on Tuesday to 4.43%. The American ten-year recorded its biggest daily increase in almost six weeks the day before, after Iranian attacks on the United Arab Emirates and in the Strait of Hormuz pushed up crude oil prices and fueled fears of a surge in inflation.
The yield on the German Bund of the same maturity is stable, at 3.07%, after an increase of around 2.5 points the day before, the markets fearing that the European Central Bank (ECB) will soon raise its key rates to contain inflation.
PATROL
The oil market fell slightly on Tuesday after having climbed almost 6% the day before. The US Navy managed to escort a Maersk ship through the Strait of Hormuz, allaying immediate fears over supplies.
Brent fell by 0.84% to $113.49 per barrel and American light crude (West Texas Intermediate, WTI) declined by 1.87% to $104.42.
MAIN ECONOMIC INDICATORS ON THE AGENDA FOR TUESDAY, MAY 5:
FR 06h45 Déficit budgétaire mars nd -32.12 mds
USA 14h00 ISM des services avril 53,7 54
USA 2:00 p.m. Job offers (Jolts) March 6,835 mlns 6,882 mlns
(Rédigé par Claude Chendjou, édité par Augustin Turpin)
