Rise in sight on Wall Street, relief on trade and Italy

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EUROPEAN SCHOLARSHIPS INCREASING AT MID-SESSION

by Laetitia Volga

PARIS (Reuters) – Wall Street is expected to rise on Thursday as the European stock markets at mid-session, investors have welcomed with relief encouraging announcements on trade talks between the United States and China and the lull policy in Italy.

Futures contracts on major New York indexes signal a Wall Street opening up 0.9% to 1.1%.

In Paris, the CAC 40 gained 1.4% to 5,443.94 around 11:45 GMT. In Frankfurt, the Dax takes 1.13% and in London, the FTSE advances by 1.09%.

The pan-European FTSEurofirst 300 index is 1.11%, the EuroStoxx 50 in the euro zone 1.35% and the Stoxx 600 1.07%, the highest since August 2nd.

Equity markets are supported by new signs of de-escalation in the business case. The Chinese Commerce Ministry said Beijing and Washington were discussing a resumption of bilateral talks, adding that China, opposed to escalating trade war, was willing to resolve the problem calmly.

Another reason for relief, Italy seems to move towards a way out of crisis. Italian President Sergio Mattarella instructed Giuseppe Conte to form a new coalition government between the 5-Star Movement and the Democratic Party. The news encourages further relaxation on Italian bond yields and allows the Milan Stock Exchange to outperform with a gain of 1.93%, its largest percentage increase since early July.

These announcements temporarily overshadow the fears associated with the general weakness of bond yields, as the reversal across the entire US yield curve is seen as the beginning of an entry into the US economy into recession.

On the indicators side, economic sentiment in the euro area improved slightly in August, contrary to expectations, supported by optimism in industry and distribution.

Investors will closely follow the publication of the second US growth estimate in the second quarter, released at 12:30 GMT, forecast at 2.0% annualized.

VALUES TO FOLLOW AT WALL STREET

Signs of easing trade tensions should primarily benefit large US stocks exposed to the Chinese market or sensitive to evolving trade negotiations such as Boeing, Apple or semiconductor manufacturers such as Qualcomm and Intel.

VALUES IN EUROPE

In Europe, the relief on Italy benefits Italian banking stocks, whose benchmark index is 2.7%. The country's two largest banks, UniCredit and Intesa Sanpaolo, gained 3.34% and 2.48% respectively.

Bouygues climbed 6.07% after posting earnings above expectations in the first half, thanks in particular to telecoms.

Pernod Ricard, world number two in spirits, gains 2.94% after seeing the growth of its annual profits accelerate thanks to China.

At the top of the Stoxx 600, Eurofins jumped 6.83% supported by better than expected half-year results.

TF1 and M6 lost respectively 4.74% and 4.10%, as BAML degraded the two groups of "underperforming" TVs.

RATE

Italy's 10-year debt yield has fallen to its all-time low, as investors welcome the prospect of a new coalition government that will avoid the convening of early elections.

The 10-year paper yield dropped more than six basis points to 0.962%, after falling to a record low of 0.929%. Its fall has reduced the spread spread between Italian and German ten-year bonds by around 160 basis points, the lowest since May 2018, compared with more than 300 points last fall.

The yield of the Bund rose timidly by one basis point to -0.711%. He fell the day before at -0.728%, a record low.

In the United States, bond yields are also climbing the slope: the 10-year return two basis points to 1.491%.

EXCHANGE

On the currency market, the dollar (+ 0.06%) rose slightly against a basket of reference currencies.

The yen, a traditional safe haven, is erasing its gains with the return of risk appetite but is heading for an increase of more than 2.2% over the month.

The euro continues its decline against the dollar and is moving around 1.1070, a one-week low.

The pound sterling is stabilizing against the dollar and the euro, after suffering the day before British prime minister Boris Johnson's decision to temporarily suspend parliament, a move interpreted as an attempt to limit debate over Brexit.

OIL

Oil prices are changing in a disjointed way: Brent fell to $ 60.52 while the US crude rose to more than $ 56, supported by the significant decline in inventories in the United States announced Wednesday.

(Edited by Marc Angrand)



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