CAC 40: a rise in sight on the eve of the Fed meeting

(CercleFinance.com) - The Paris Bourse is likely to attempt a rebound at the opening bell on Tuesday, in a more optimistic market a few hours before the start of the Federal Reserve's two-day meeting.


At around 8:15 a.m., the 'future' contract on the CAC 40 index - expiring in September - gained 47 points to 7501, suggesting a recovery from the previous day's decline.

Yesterday, heaviness had narrowly prevailed, with the flagship index ending the session down 0.2% at 7449 points, after a long period of hesitation.

Today, however, trading is likely to remain relatively limited, with modest spreads and low volumes, on the eve of the Fed's monetary policy decisions.

The US central bank, which will issue its statement tomorrow at 8:00 pm following two days of debate, has been preparing minds for a rate cut for several weeks.

More and more investors now believe that the Fed will opt for a 50 basis point cut in its key rates, a scenario assimilated by 67% of traders according to CME's FedWatch tool.

This is important because, since the beginning of 2009, the FOMC has never gone against the expectations set by the majority of the market at the start of a week marked by the Fed," points out Michael Brown, strategist at Pepperstone.

As traders' expectations are high, the risk of disappointment is just as great.

To begin a cycle of monetary easing with a move of this magnitude would be a major first", point out the teams at asset manager Apicil.

In addition to economic policy, market participants will also be paying close attention to US retail sales figures, due at 2.30pm.

A disappointing statistic - showing a dip in US household consumption - would only reinforce expectations of a significant 50 basis point rate cut tomorrow.

US industrial production figures, which have remained at a standstill for three years, will be less closely watched.

On the Old Continent, the ZEW investor sentiment index due later this morning should confirm the gloomy state of activity in Europe's leading economy.

In terms of interest rates, expectations of monetary easing are leading to a logical easing in government bond yields on both sides of the Atlantic.

The yield on 10-year US Treasuries remains, at 3.62%, at its lowest level since May 2023, while its German equivalent is back below 2.12%.

On the foreign exchange market, the dollar is experiencing a bout of weakness on the eve of the Fed's announcements, enabling the euro to hold above the 1.1130 threshold.

On the oil front, oil prices are showing firmness, with a barrel of US light crude (WTI) breaking through its $70 resistance, without however benefiting from a massive buying movement.

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