CAC 40: a cautious mood as we await PMIs

(CercleFinance.com) - The Paris Bourse is expected to fall on Tuesday morning, with markets lacking any clear direction ahead of the morning's release of PMI indices, which are expected to confirm the current slump in the European economy.


At around 8:15 a.m., the future contract on the CAC 40 index - for delivery at the end of December - was down 13 points at 7328 points, heralding a start to the session in negative territory.

Despite several attempts to return to equilibrium, the Paris market had stalled on Monday for the first session of the week, closing down a limited 0.2% at 7332 points.

Wall Street, meanwhile, suffered its heaviest consolidation since November 21, with the Dow Jones down 0.2% and the Nasdaq Composite down more than 0.8%.

Indices lost a major support factor with the end of the bond yield downturn, which had been buoyed by better-than-expected inflation figures and hopes of a soft landing for the economy.

The stock market is catching its breath in anticipation of next week's central bank meetings, which are expected to confirm the possibility of rate cuts in 2024, without specifying a timetable", explains Christopher Dembik, Investment Strategy Advisor at Pictet AM.

"This should, however, be enough to sustain the end-of-year stock market rally", believes the analyst.

If the money market is anything to go by, investors are still betting on a first rate cut in the spring, with some operators even betting on a cut as early as the beginning of 2024.

From a technical point of view, the various indicators also suggest that the CAC 40 index - now comfortably above the 7300-point threshold - is well placed to continue its advance towards its annual records with a view to further rate cuts.

The trend should nonetheless remain cautious ahead of the day's numerous activity indicators, and the eagerly-awaited monthly employment report on Friday.

After their sharp decline in recent months, the eurozone services PMI indexes have stabilized at mediocre levels since the start of the autumn, raising hopes that economic activity will remain stagnant at best.

In the USA, confidence in the services sector was stable or up slightly in November, according to regional data already published.

However, since the start of the year, the ISM has fluctuated between 50 and 55 points, with no real trend.

On the bond market, the increasingly perceptible disconnection between the US economy and that of the eurozone is supporting the yield on 10-year US government bonds, which has climbed back above 4.28%.

The 10-year German Bund, the eurozone's benchmark rate, eased to 2.35%, as investors sought refuge in bonds in view of the economic slowdown taking shape on the Old Continent.

The situation remains the same on the currency front, where the dollar continues to gain ground against the euro, which is back near a two-month low of 1.0820.

Both benchmark crude contracts are stabilizing, as Thursday's Opec+ production cut fails to offset signs of a slowdown in demand.

US light crude (West Texas Intermediate, WTI) is currently nibbling 0.1% at 73.1 a barrel, and North Sea Brent is broadly unchanged at $78.

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