(Paris) Stock markets are up on Monday and bond rates are moving at high levels, after a less sharp than expected reduction in Chinese interest rates, which pushed Chinese markets into the red.
On the Old Continent, around 7:20 a.m. (Eastern time), Paris gained 1.18%, Frankfurt 0.74%, Milan 1.58% and London 0.52% in a summer session where the absence of some investors may cause larger variations.
Wall Street was heading for a slightly higher open, around 0.5% according to the futures of the three major indices.
In China, the Shanghai Stock Exchange closed sharply lower (-1.24%), as did Shenzhen (-1%) and Hong Kong (-1.57%).
“The week starts with a low appetite (for risk, editor’s note) as Chinese banks cut interest rates less than expected,” commented Swissquote Bank analyst Ipek Ozkardeskaya.
On Monday, China decided to cut the one-year interest rate, which serves as a benchmark for business loans, to 3.45% to stimulate the economy, but failed to convince the markets.
Ipek Ozkardeskaya points out that “healthy economic data from the United States and darker clouds over China cast a shadow over the stock and bond markets”. In the United States, investors are wondering about a possible further rate hike given the risk of a resumption of inflation.
This week, investors’ eyes will be on the annual meeting of central bankers in Jackson Hole, USA, where Jerome Powell, Chairman of the US Federal Reserve (Fed) and Christine Lagarde, President of the European Central Bank (ECB ), are scheduled to deliver speeches on Friday.
“It’s a safe bet” that the Fed will maintain its position, but the fear of monetary tightening “is already priced in,” said Ipek Ozkardeskaya.
On the bond market, the interest rate on US 10-year debt is close to its highest since 2007, around 7:40 a.m. (Eastern time), it stood at 4.29%. That of Germany was at 2.67% against 2.62% at the close on Friday.
The global real estate sector is struggling on Monday, with most values falling, amid high borrowing rates. In London, the giant Persimmon lost 2.77% around 7:30 a.m. (Eastern time), Hammerson dropped 2.78% and Crest Nicholson 7.15%. For its part, the German Tag Immobilien lost 2.04% in Frankfurt.
In China, too, the shares of real estate groups fell on Monday, the situation of the sector, with its share of developers on the verge of bankruptcy and unfinished housing, being a brake on Chinese growth and worrying investors.
In Hong Kong, Longfor Group fell 3.70%, China Resources Land 3.45% and Logan Group 4.47%. One of China’s largest real estate groups, Country Garden, whose debt worries the markets, also ended in the red (-2.94%).
Oil prices were up around 7:40 a.m. EST: a barrel of Brent North Sea oil, for October delivery, gained 1.19% to $85.82 and its US equivalent, the a barrel of West Texas Intermediate (WTI), for delivery in September, gained 1.06% to 82.12 dollars.
On the foreign exchange market, the euro took 0.34% against the dollar, to 1.0910 dollars for one euro.
On the natural gas side, the Dutch TTF futures contract, considered the European benchmark, was moving without clear direction, at 38.50 euros per megawatt hour (MWh), shortly after climbing to 42.66 euros per MWh. The market remains alert to developments in Australia where a call for a strike at offshore liquefied natural gas (LNG) platforms in the West sparked a price spike earlier in August. Investors fear that Asian buyers in need of LNG will switch to the European market.
