Bags today July 5 | Europe opens down: fears for the Chinese economy and expectations for the Fed’s minutes

The European Stock Exchanges open the session of Wednesday 5 July down after closing Tuesday with a negative sign. Milan trades in the red by 0.2%, Frankfurt by 0.7% and Paris by 0.5%. The differential between Btp and Bund instead stable at 174 basis points, with the yield on the ten-year Italian government bond rising slightly to 4.21%.

Fears for the Chinese economy weigh on the performance of European stock markets. In June, the Caixin services PMI index in China slowed again to 53.9, down from 57.1 in May, slipping to the lows of January. The growth of Chinese industrial activity has also slowed. The two data had a negative impact on Asian stocks with Tokyo closing down by 0.3%, Hong Kong by 1.63%. Shanghai and Shenzhen are instead down by 0.49 and 0.61%.

On Milanese equities, the upward series continues for Nexi, which rises by 1.6% and collects the positive opinion of Ubs. Leonardo and Ferrari also did well (+0.7%), Unicredit started to rise again (+0.76%) which is the exception in a generally weak banking sector. Tim rises by 0.2% the day after CEO Pietro Labriola’s hearing in the Senate. Asset management was weak, followed by Banca Generali (-1.4%), minus sign for St (-0.9%). On the foreign exchange market, the euro-dollar exchange rate fluctuated at 1.09 (from 1.0914 at the close yesterday) while the euro/yen at 157.63 (157.43). Dollar/yen at 144.6 (144.44). Oil is holding back after the run of the last two sessions: Brent in September at 76.06 dollars (-0.25) and Wti in August at 71.13 dollars (-0.27%).

However, investors’ attention is still focused on central banks. The publication of the minutes of the June meeting of the Federal Reserve is expected tonight, from which further clues may be gleaned regarding the future decisions on rates by the American central bank. As for the ECB, the president of the Bundesbank Joachim Nagel said that rates must continue to rise to bring down inflation. After the 25 basis point increase decided in June, a further increase in the meeting of 27 July now appears certain as announced by the president Christine Lagarde. The question of how much interest rates still need to rise cannot be resolved at the moment – Nagel stressed speaking at a banking supervisory conference in Frankfurt. We can’t even say how long they will stay high and how they will develop thereafter: it depends on the inflation path which is highly insecure. In the short term, he continued, wages for example could rise more than expected, prolonging inflation through second-round effects. High prices for energy, raw materials and other commodities could also be passed on to final customers to a greater extent than current projections. Over the longer term, other factors could help keep inflation elevated. We are witnessing a geopolitical transformation that is probably unprecedented in the current century, concluded Nagel. Climate change and the necessary decarbonisation of the economy require extensive adaptation measures.