CAC40: Europe down 1.3%, interest rate tension alarming

(CercleFinance.com) - With 35 minutes to go before the close, the Paris Bourse is further down (-1.
3% to 8,100, i.e. -120pts in a few hours), a downturn that raises some questions given the hopes of a resolution to the conflict in Ukraine... but which may well be explained by the bond market, with Bunds and OATs "struggling", posting a clear deterioration in yields since last Friday.

The E-Stoxx50 index is no better positioned than the CAC, with -1.3% at 5,4603Pts, while the DAX40 set a 17th all-time record at 22,935 this morning, before completely reversing course and losing -1.5% in a straight line to give up -1.6% at 22.475 (-450pts in a handful of hours).
On Wall Street, there were no new all-time highs, but a slow, steady slide since the opening: the S&P500 and Nasdaq-100 (at their zenith the previous day) fell by -0.3% to -0.4%, while the Dow Jones gave up -0.4% to -0.5%.

Yesterday, the Paris market managed to post a seventh consecutive session of gains (led by banking and defense stocks), even though questions remain as to the content of the peace agreement currently being prepared by Washington and Moscow in Riyadh.

Today, concern prevails, with Brussels reaffirming its intention to maintain sanctions against Russia.
If the Ukrainian issue now overshadows that of trade tensions, investors may well begin to relegate the geopolitical situation to second place in view of the economic agenda for the next few days.

Operators have just discovered a 9.8% fall in US housing starts in January compared with the previous month, to an annualized rate of 1,366,000.

U.S. building permits - which are supposed to predict future housing starts - were flat (+0.1%) at 1,483,000 last month. Finally, housing completions climbed by 7.6% to 1,651,000.
Wall Street will tonight (8pm) take note of the "minutes" of the Fed's last meeting on January 28 and 29, on the lookout for any indications as to the timing of future rate cuts in the United States.

At the end of last month's meeting, the Fed decided to leave monetary policy unchanged, in order to give itself more time to assess inflation trends and the economic impact of the Trump administration taking office.

According to the CME Group's FedWatch barometer, market participants expect the next rate cut to take place in July, but with a 43.9% probability of a rate cut, beating the 42.9% probability of a "status quo" by a narrow margin.

On the US bond front, calm reigns, with yields fluctuating at the margin: T-Bonds are perfectly stable at 4.545%.
On the other hand, the trend is seriously deteriorating on our OATs with +7.8pts to 3.226% and on Bunds with +6pts to 2.5512%, while Italian BTPs are stretching by +9pts to 3.637%.
The euro is not benefiting from the rise in interest rates, and is down 0.15% at $1.0435.

In Paris, professionals will also be turning their attention to corporate results scheduled between now and the end of the week, in the hope that any good surprises will enable the CAC to beat its records.

The publications of heavyweights such as Airbus, Renault and Schneider Electric, scheduled for tomorrow morning, are generating a certain amount of anticipation, as is that of Air Liquide, scheduled for Friday.

Oil prices rose for the third consecutive session, buoyed by the strike on a Russian oil pipeline by Ukrainian drones, which could cut Kazakhstan's oil exports by 30%.

Brent North Sea crude gained 0.6% to $76.2, while the March contract for US light crude (West Texas Intermediate, WTI) gained 0.5% to $72.25 a barrel.

While calm prevailed on the foreign exchange market, gold returned to its highs of $2,945, as the easing of the situation in Ukraine did not seem to diminish interest in the yellow metal.

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