Europe expected with no clear trend ahead of US inflation data

PARIS (Reuters) – The main European stock markets are expected in scattered order but with small spreads on Friday at the opening pending the publication of a key measure of inflation in the United States, which should fuel debates on the trajectory Federal Reserve rates.

The first indications available indicate a drop of 0.05% for the CAC 40 in Paris, an increase of 0.07% for the Dax in Frankfurt and a decline of 0.28% for the FTSE in London.

The latter could suffer from the decision taken on Thursday by the British government to impose an exceptional tax of 25% on the profits of oil and gas producers to help finance aid to households in the face of inflation.

Despite the expected slight decline, the London Stock Exchange should end the week on the rise, as should the other major European markets.

The Stoxx 600 and CAC 40 closed Thursday at their highest level in more than a week as investors were reassured by “minutes” from the Federal Reserve that suggested a pause in interest rate hikes institution is possible later in the year.

“We have recently witnessed a small but remarkable change in Fed communications, with some officials suggesting the option of a slowdown or a pause…given the challenging macro backdrop, tighter conditions and the potential slowdown in inflation,” said Bank of America strategists.

The markets will follow at 12:30 GMT the publication of monthly statistics of household income and expenditure in the United States, which include the PCE consumer price index, which is closely watched by the Fed.

In the “core” version, i.e. excluding the volatile categories of energy and food products, the index is expected to rise by 4.9% over one year, which would mark a slowdown after 5 .2% in March and would fuel the idea that more aggressive monetary tightening can be avoided.

AT WALL STREET

Wall Street is expected to be little changed after rising sharply on Thursday as strong forecasts from retail groups and less anxiety surrounding future Fed rate hikes prompted investors to take risks. [.NFR]

The Dow Jones index gained 1.61% to 32,637.19 points, the S&P-500 gained 1.99% to 4,057.84 points and the Nasdaq Composite rose 2.68% to 11,740.65 points.

While American distributors have warned in recent weeks about their annual results, Macy’s (+ 19.3%) reassured by raising its profit forecast for the year.

Discount chains Dollar General and Dollar Tree rose 13.7% and 21.9% respectively after announcing higher annual sales forecasts, suggesting consumers are turning to the products the least expensive as inflation hit a multi-decade high.

IN ASIA

After three negative sessions, the Nikkei index in Tokyo gained 0.65% in the wake of Wall Street.

In Chinese markets, the SSE Composite of Shanghai and the CSI 300 take 0.62% and 0.8% respectively after the long-awaited speech of the head of the American diplomacy on the strategy of the United States towards China , which gives hope for an appeasement of the opposition between the two world powers.

Antony Blinken said Washington does not want a “new cold war” with Beijing, nor will it try to change China’s political system, but will defend international law and the institutions that make it possible for countries to coexist.

In Hong Kong, the Hang Seng climbed 2.65% after results above expectations from Alibaba (+12.52%) and Baidu (+15.04%).

EXCHANGES/RATES

The dollar retreats to its lowest level in a month against a basket of benchmark currencies, as traders revise their expectations that the Fed’s monetary policy could slow or even halt the rate hike cycle in the fourth quarter.

The euro thus rises to 1.0752, its highest since April 25.

On the bond market, the yield on ten-year Treasuries stands at 2.7504%, down one basis point.

OIL

Oil prices are changing little on Friday, which should not prevent Brent from achieving its best weekly performance in a month and a half, driven by the prospect of a ban on Russian oil imports by the European Union.

Brent gained 0.22% to 117.66 dollars a barrel and US light crude (West Texas Intermediate, WTI) gained 0.14% to 114.25 dollars.

(Written by Laetitia Volga, edited by Matthieu Protard)

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