Caution in sight in Europe with geopolitics and before PMI

by Claude Chendjou

The main European stock markets are expected on a cautious note on Wednesday in a session marked by the publication of business activity indices in Europe and the United States and a new survey on American employment while awaiting the official monthly report on the subject scheduled for Friday.

The market is also monitoring the latest developments in the Middle East where incidents in the Gulf have been reported against a backdrop of impasse in negotiations between the USA and Iran.

According to the first available indications, the Parisian CAC 40 should lose 0.10% at the opening. The Dax in Frankfurt could fall 0.23%, while the FTSE 100 in London is expected to drop 0.04%. The EuroStoxx 50 index is expected to fall by 0.20% and the Stoxx 600 down by 0.18%.

This Wednesday’s session should be dominated by the publication of the PMI indices for services in China, Europe and the United States, as well as the ADP firm’s survey on American employment and producer prices in the euro zone.

A private survey shows that services activity in China – grew in May at its fastest pace in three months, to 54.4 from 52.6 in April, supported by a solid rise in new orders and a rebound – in demand from abroad, although increased price pressures weighed on businesses.

These statistics are essential as the European Central Bank (ECB) meets next week and the US Federal Reserve (Fed) in two weeks amid expectations of a tightening of monetary policy to deal with a resurgence in inflation due to soaring “Oil prices against a backdrop of war in the Middle East.

On the geopolitical level, the American army declared having repelled, on the night of Tuesday to Wednesday, attacks by Iran against regional countries and having struck in response a command center on the island of Qechm, in the Strait of Hormuz. The Iranian Revolutionary Guards for their part said they had targeted a ship linked to the United States after an Iranian tanker was hit near Hormuz.

These new tensions are driving up oil prices, which nevertheless remain below the symbolic mark of 100 dollars per barrel.

A WALL STREET

The New York Stock Exchange ended slightly higher on Tuesday, as risk appetite fueled by artificial intelligence (AI) offset tensions linked to negotiations aimed at ending the conflict between the United States and Iran.

The Dow Jones index gained 0.45%, or 228.91 points, to 51,307.79 points. The broader Standard & Poor’s 500 gained 9.82 points, or 0.13% to 7,609.78 points. The Nasdaq Composite advanced 7.09 points, or 0.03%, to 27,093.901 points.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index advances 2.2% to 68,203.79 points, thus exceeding the threshold of 68,000 points for the first time in its history, just two days after crossing the barrier of 67,000 points, while the rise in shares linked to AI offsets concerns about the Middle East. The broader Topix gained 1.5% to 3,982.89 points.

The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) gained 0.17%.

In China, the Shanghai SSE Composite gained 0.39% and the CSI – 300 increased by 1.21%, the indices being driven by values ​​linked to semiconductors.

The Hang Seng in Hong Kong fell 1.52%.

VALUES TO FOLLOW IN EUROPE:

PATROL

The oil market strengthened on Wednesday, extending the gains of the previous session, while hostilities in the Middle East resumed alongside diplomatic talks between Iran and the United States without real progress.

Brent rose 1.30% to $97.27 per barrel and American light crude (West Texas Intermediate, WTI) rose 1.39% to $95.06.

EXCHANGES/RATES

The dollar is standing still (+0.05%) against a basket of reference currencies after having progressed slightly overnight.

The continued strength of the greenback caused the Japanese yen to fall to 160 per dollar, a level at which Japanese authorities have already intervened, while hostilities in the Gulf have strengthened demand for the American currency, a safe haven.

The euro advanced 0.08%, to 1.1623 dollars, while the pound sterling traded at 1.3453 dollars (-0.01%).

The yield on ten-year US Treasury bonds rose by 1.2 basis points, to 4.467%, after a decline the day before linked to the increase in job offers (Jolts survey) and the persistent volatility of oil prices.

MAIN ECONOMIC INDICATORS ON THE AGENDA FOR JUNE 3:

COUNTRY GMT INDICATOR PERIOD PREVIOUS CONSENSUS

FR 07h50 Indice PMI S&P/HCOB composite mai 43,5 43,5*

(definitive)

Indice PMI S&P/HCOB des 42,9 42,9*

services (final)

DE 07h55 Indice PMI S&P/HCOB composite mai 48,6 48,6*

(definitive)

Indice PMI S&P/HCOB des 47,8 47,8*

services (final)

EZ 08h00 Indice PMI S&P/HCOB composite mai 47,5 47,5*

(definitive)

Indice PMI S&P/HCOB des 46,4 46,4*

services (final)

GB 08h30 Indice PMI S&P/CIPS composite mai 48,5 48,5*

(definitive)

Indice PMI S&P/CIPS des 47,9 47,9*

services (final)

EZ 09:00 April producer prices +0.5% +3.4%

– over one month +4.9% +2.1%

USA 12h15 Survey ADP May 117,000 109,000

USA 14h00 Indice ISM ​des services mai 53,8 53,6

*first estimate

(Edited by Claude Chendjou, edited by Kate Entringer)