Europe’s Economy vs. Geopolitical Tensions: Market Insights

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The cautious rebound started on Monday by the main European stock markets could come to an end on Tuesday as investors remain divided between the first good quarterly results of companies and fears of an escalation of the conflict between Israel and Palestinian Hamas.
According to the first available indications, the Parisian CAC 40 should lose 0.15% at the opening. The Dax in Frankfurt could nibble 0.05%. The FTSE 100 in London is expected to decline by 0.1%. The EuroStoxx 50 index is expected to fall by 0.02%.

Iranian Foreign Minister Hossein Amirabdollahian told state television on Monday that “preventive” actions could take place in the coming hours as Israel continued to shell the Gaza Strip and warns Iran and Hezbollah .

At the same time, diplomatic efforts intended to obtain a ceasefire to allow the delivery of humanitarian aid to the Gaza Strip seem to have failed for the moment, despite the mediation of the United States which for a time fueled optimism. careful. US President Joe Biden is due to visit Israel on Wednesday.

In addition, with the terrorist attack in Brussels, where two Swedes were killed on Monday evening, risk-taking on the financial markets should be limited.

A multitude of “favorable” signs coming from the strength of American consumption, economic growth and interest rates which support bank profits nevertheless offer reasons for hope, tempers Kerry Craig, strategist at JP Morgan Asset Management .

After the quarterly publications, considered positive, from JPMorgan Chase, Wells Fargo and Citigroup, the banks Bank of America and Goldman Sachs Group are notably expected this Tuesday before the opening of the session on Wall Street, while in the airline United Airlines will open the ball after the closing. In the technology sector, Tesla and Netflix are expected this week.

According to LSEG data, the profit of S&P-500 companies is expected to increase by 2.2% in the third quarter on an annual basis.

In terms of economic indicators, the market will take note at 9:00 a.m. of the ZEW index of investor sentiment in Germany and at 12:30 p.m. GMT of retail sales statistics in the United States. On Wednesday, Chinese retail sales and inflation figures in the Eurozone and the United Kingdom will be published before the Beige Book of the American Federal Reserve, which serves as a working basis for its monetary policy committee.

A WALL STREET

The New York Stock Exchange ended sharply higher on Monday driven by the start of the quarterly results season, even as investors continued to monitor developments in the conflict between Israel and Hamas.

The Dow Jones index gained 0.93%, or 314.25 points, to 33,984.54 points.
The broader S&P-500 gained 45.85 points, or 1.06%, to 4,373.63 points.
The Nasdaq Composite advanced 160.75 points (1.20%) to 13,567.98 points.

The CBOE Volatility Index, considered a gauge of the level of fear on Wall Street, fell, while all major sectors of the S&P-500 finished in the green.
The Dow recorded its largest one-day percentage gain in about a month.

On the value side, Lululemon Athletica increased by 10.3% to reach a peak in almost two years while the Canadian sports clothing manufacturer will join the S&P-500 this week, replacing Activision Blizzard.

IN ASIA

On the Tokyo Stock Exchange, the Nikkei index advanced 1% to 31,976.71 points, investors preferring to focus on company results and the resistance of the American economy rather than on tensions in the Middle East. The broader Topix took 0.65% to 2,288.43 points.

The MSCI index bringing together stocks from Asia and the Pacific (excluding Japan) gained 0.4%, to a three-week high.

In China, the Shanghai SSE Composite gained 0.02% and the CSI 300 increased by 0.14%, despite uncertainties in the Chinese real estate sector. Country Garden’s entire offshore debt will be considered in default if the Chinese real estate developer fails to pay a $15 million coupon on Tuesday, the deadline of the 30-day grace period granted to it.

VALUES TO FOLLOW IN EUROPE:

On the bond market, the yield on ten-year US Treasury bonds rose around four basis points on Tuesday, to 4.7563%, compared to 4.629% on Friday.
The dollar also rose again, by 0.09%, against a basket of reference currencies, after having fallen by 0.36% on Monday, currency traders showing anxiety with the tensions in the Middle East and in the approach of an intervention on Thursday by Jerome Powell, the president of the American Federal Reserve.

 

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