While waiting for the ZEW index in Germany, European equity markets should recover at the opening on Tuesday. The FTSE 100 opens at 7,205.81 points (-1.53%), the SMI at 10,896.25 points (-1.70%), the AEX at 661.54 points (-3.00%), the BEL 20 at 3,712.41 points (-1.53%), the IBEX 35 at 8.183.30 points (-2.47%), the DJIA at 30,516.74 points (-2.79%), the Nasdaq at 10,809.23 points (-4.68%), the S&P 500 at 3,749.63 points (-3.88%) and the Nikkei 225 at 26,528.32 points (-1.70%).
In terms of exchange rates, the change from the close in New York shows EUR/USD opening at 1.0426 (+0.18%), EUR/JPY at 140.25 (+0.26%) and USD/JPY at 134.53 (+0.08%).
European equity markets are expected to open higher on Tuesday, regaining some color after their recent plunge, as investors await Germany's ZEW leading indicator. At 7:35 a.m., the CAC 40 futures contract was up 50 points, or 0.8%, according to data from broker IG Markets. The DAX 40 contract was up 112 points, or 0.8 percent, and the FTSE 100 was up 42 points, or 0.6 percent.
On Monday, Wall Street suffered another correction as investors feared the Federal Reserve would cause a recession by drastically raising interest rates to control inflation. The Dow Jones Industrial Average (DJIA) fell 2.8% to 30,516.75 points. Weighed down by technology stocks, the S&P 500 index gave up 3.9% and has now lost more than 20% since its previous peak, which corresponds to the definition of a "bear market" on Wall Street. The tech-heavy Nasdaq Composite closed down 4.7 percent at 10,809.23 points. JPMorgan joined other banks, such as Barclays and Jefferies, in anticipating a 75 basis point increase in U.S. policy rates this week, given the persistence of very high inflation across the Atlantic. Wall Street and Asian markets continued to decline on Tuesday. At the end of the session, the Nikkei index of the Tokyo Stock Exchange lost 1.6%, the Hang Seng gave up 0.4% in Hong Kong and the Shanghai Composite index gave up 1%.
Yields on short-dated U.S. Treasuries outpaced those on long-dated securities Tuesday morning, a phenomenon that has become increasingly common.a phenomenon known as a "yield curve inversion" that has often preceded recessions. After hitting an 11-year high on Monday, the yield on the 10-year Treasury note fell on Tuesday to 3.355%. The yield on the two-year bond gained 1 basis point to 3.368%.
The euro rose against the dollar on Tuesday morning, but remains close to its low points of the year. Traders' attention in the foreign exchange market remains focused on the Fed. Inflation in the U.S. came in stronger than expected in May and the University of Michigan's price expectations index rose to a record high.This is leading the market to expect more monetary tightening than initially expected. Late Monday, federal funds futures, which traders use to bet on U.S. central bank policy, showed a roughly 28% probability that the Fed will raise rates by 75 basis points this week. A week ago, that probability was about 3%.
Oil prices were down slightly on Tuesday due to possible profit taking. Topics in the news include Libyan production cuts, China's continued push to slow the spread of Covid-19 and fears of a global recession wiping out demand, summarized Stephen Innes, managing director of SPI Asset Management. At 7:20 a.m., the August contract for North Sea Brent crude was down 8 cents at $122.19 a barrel. The Nymex-listed July light sweet crude (WTI) contract was giving up 2 cents to $120.91 a barrel.