CAC 40: trading to liven up with inflation in the USA

(CercleFinance.com) - The Paris Bourse is set to open with no clear direction on Wednesday, as investors prepare for a busy second half of the week, with inflation figures from the US and a meeting of the European Central Bank (ECB).


At around 8:15 a.m., the future contract on the CAC 40 index - expiring in December - was trading at 7,400.5 points, down 3.5 points, suggesting that the start of the session could be at or near a standstill.

The Paris market ended yesterday's session down 1.1% at 7394 points, reflecting a consolidation movement following a series of eight consecutive sessions of gains.

While the CAC has managed to recover 3.5% since its November 27 low, it is still down almost 2% since the start of the year, underperforming the Euro STOXX 50 index by more than 11 percentage points, which has gained more than 9% in the meantime.

In a note released yesterday, Goldman Sachs strategists consider that the Paris Bourse's recent underperformance does not necessarily make it more attractive in view of the unfavorable fundamentals at the root of its difficulties.

Large multinationals have been impacted by weak activity in China, while SMEs have suffered from the political uncertainty prevailing in the country", explains the American investment bank.

Furthermore, the CAC's valuation "remains high compared with its historical averages", argues the New York firm.

Goldman is not alone in expressing caution about French equities.

Crédit Mutuel AM describes the situation as "dangerous in the medium term, with a political crisis likely to continue at least until next July, when new parliamentary elections could be held".

On Wall Street too, US equity markets fell back into the red on Tuesday, with caution the order of the day ahead of today's publication of the consumer price index for November.

These figures will be closely watched, especially as inflation has been trending upwards of late, and the latest employment report sent mixed signals about the strength of the economy.

According to CME's FedWatch tool, the markets rate the chances of the Fed cutting rates again in a week's time at over 86%.

The market is also awaiting decisions from the ECB, which is expected to opt tomorrow for a further 25 basis point cut in its main key rates.

According to analysts, the key element of the meeting will be the Frankfurt-based institution's updated economic forecasts.

A possible upward revision of the eurozone's growth forecast, currently set at 1.3% for 2025, could herald an acceleration of the monetary easing currently underway.

If the ECB deletes from its statement its famous phrase 'rates will be kept sufficiently restrictive for as long as necessary', this will herald a new ECB objective of rapidly lowering its key rate to its neutral level", warns Patrick Barbe at Neuberger Berman.

In anticipation of the ECB's announcements, the bond market is little changed, with the spread between the yield on 10-year German Bunds (2.12%) and that on OATs of the same maturity (2.88%) remaining perfectly stable at 76 basis points.

On the other side of the Atlantic, the yield on ten-year Treasuries, the benchmark for US borrowing costs, stabilized at around 4.22%, ahead of US inflation.

In the energy market, oil prices are maintaining their bullish bias ahead of this afternoon's release of weekly data on US oil inventories.

Brent crude is up 0.7% to $72.7 a barrel, while Texas WTI is up 0.7% to over $69.

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