European stocks continued to rise on Wednesday while government bonds across the region rallied, as investors shed the woes of some of America’s biggest companies to focus on signs of inflation. slow down.
The Stoxx Europe 600 regional index was up 1% in early trading, lifting the week’s gain to 3%, with London’s FTSE 100 up 0.3% and France’s Cac 40 up 1.3%. Germany’s Dax rose 1.3%.
The yield on the 10-year French bond fell 0.09 percentage points to 2.81% after inflation in the country rose 6.7% in the year to December, down from 7.1% in November. .
The yield on Germany’s equivalent bond fell 0.07 percentage points to 2.3%, a day after data showed consumer price inflation in the country fell to 9.6% in the year to December, a decline. compared to 11.3% recorded in the previous month. Output decreases as price increases.
The lower-than-expected inflation figure encouraged investors to cut their projections of where the European Central Bank’s final policy interest rate could stabilize. Markets now expect interest rates to peak at 3.3% in July, down from 3.5%.
In the US, contracts that track Wall Street’s benchmark S&P 500 index and those that track the tech-heavy Nasdaq 100 rose 0.4% and 0.8%, respectively.
U.S. stocks started 2023 with a sizable drop that, however, was dragged lower on the first trading day of the year due to underperforming large-cap stocks, including Tesla and Apple. The electric car company fell as much as 12% on Tuesday after delivering fewer vehicles than expected in the last three months of 2022, while shares of Apple fell 3.7% following reports of demand for the car. their devices are slowing down.
Mike Zigmont, head of research and trading at Harvest Volatility Management, said Tesla’s disappointing numbers in particular “put a wet blanket over all large-cap high-tech companies.” And when those stocks turn, the rest follow.” “The week has just started so I don’t think the bulls should give up, but this is not how investors think the year will begin.”
Traders’ moody reaction to the struggles of two of America’s most valuable brands underscores the anxiety that spread across financial markets at the start of the year and followed a bad December. currencies for both the S&P 500 and Nasdaq Composite.
Although the Federal Reserve raised borrowing costs by half a percentage point last month, ending a streak of four consecutive 0.75 percentage points gains, investor optimism was dented by recent developments. warned that the central bank’s main policy rate may need to rise above 5% from where it is now. between 4.25% and 4.5% before inflation returns to the target level.
Fresh US jobs and manufacturing figures on Wednesday will be scrutinized for signs that the Fed’s monetary tightening campaign is bearing fruit. According to economists polled by Refinitiv, the US is expected to post 10 million new jobs in November, down from 10.33 million vacancies in October, marking a weekly decline. second month in a row.
The US manufacturing sector is also forecast to contract for a second straight month as higher prices and the risk of an economic downturn dampen demand for commodities. Investors are likely to interpret the resilience in both parts of the economy as evidence that interest rates will stay higher for longer, rendering risk assets underperforming more attractive.
Asian stocks also rose on Wednesday, with Hong Kong’s Hang Seng up 3.2%. The index is now up about 40% since early November. China’s CSI 300 index of shares listed in Shanghai and Shenzhen is up 0.1%.