CAC40: ends in green, ECB cuts rates as expected

(CercleFinance.com) - After gaining over 1% in the morning, the Paris Bourse erased most of its gains in the second half of the session, ending the day up 0.
52% at 7,435 pts, helped by Safran (+3.1%) and Legrand (+2.9%) in particular.

At 2.15pm, all eyes turned to the European Central Bank (ECB) which, as anticipated by the markets, cut its key rates by a quarter point, a further gesture of monetary policy easing in an economic context that remains gloomy.

The interest rate on its main refinancing operations will be cut to 3.65%, that on the marginal lending facility to 3.90%, while the rate on the deposit facility will rise to 3.50%.

In its press release, the ECB explains that recent inflation data are broadly in line with expectations, with pressures on labor costs easing.

Financing conditions remain restrictive, and economic activity remains sluggish, reflecting weakness in private consumption and investment", explains the Frankfurt-based institution.

The central bank adds that it has revised its forecasts downwards, expecting economic growth to reach 0.8% in 2024, then 1.3% in 2025 and 1.5% in 2026.

Christopher Dembik, Investment Strategy Advisor at Pictet AM, said this morning: "We continue to believe that the pace of the decline in the cost of money is too slow in the eurozone, given the weak growth. The markets will have to wait a week for the decision of the US Federal Reserve (Fed), which could in turn announce a cut in its key rates through its Chairman, Jerome Powell.

Without a firmer recovery in credit, which would boost household and business investment, there is a real risk that economic stagnation will set in for the long term in the eurozone", he warned.

On the statistics front, the Labor Department announced that 230,000 new jobless claims were registered in the USA during the week of September 2, up by 2,000 on the previous week (whose figure was revised upwards from 227,000 to 228,000).

It should be noted that producer prices rose at a pace in line with expectations in the USA in August, a development which shows that inflationary pressures are now better under control in the country.

The Producer Price Index (PPI) thus rose by 0.2% last month, after having remained unchanged in July, a figure in line with economists' forecasts.

Over one year, producer prices were up by 1.7%.
On the bond front, 10-year T-Bonds stagnated at 3.68%, while German Bunds with the same maturity were at 2.15%.

On the forex front, the euro gained 0.2% against the greenback to $1.104/E.

Brent crude oil rose by 2.9% to $72.7 a barrel, while gold gained nearly 1.5% to $2,553 an ounce.

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