CAC 40: on a negative note, cooled by the Fed

(CercleFinance.com) - The Paris Bourse is set to open slightly lower on Thursday morning, following last night's cautious stance on interest rate cuts by the US Federal Reserve.


At around 8:15 a.m., the June-delivered future contract on the CAC 40 index was down 21 points at 7,842, suggesting a cautious start to the session.

As expected, the Fed left rates unchanged at the end of its two-day monetary policy meeting, but somewhat dampened investors' expectations of monetary easing.

The Fed's new interest rate projections - the so-called "dot plots" - now show only one rate cut in 2024, compared with three so far.

Of the 19 members of the Monetary Policy Committee (FOMC), four expect no rate cuts this year, seven expect one and eight expect two.

'This FOMC isn't really a game changer (...) but it is a little more hawkish than expected", comments Bastien Drut, head of strategy and economic research at CPRAM.

"Powell's effort to decentralize Fed policy from the price stability mandate and to focus a little more on the labor market is apparent", adds the economist.

But the more restrictive stance of US monetary policy has not dissuaded investors from continuing to place massive amounts of capital on Wall Street.

In the wake of the Fed's statement, the Nasdaq set new records on Wednesday evening, still buoyed by continued gains by Apple and Nvidia, among others.

Traders shrugged off the Fed's statements to focus on the easing of inflation, all the more so as the day's indicators highlighted an easing of upward pressure on prices.

Against this backdrop of falling inflation expectations, the search for yield continues to have the wind in its sails.

On the bond market, ten-year paper fell back below the 4.30% mark, to around 4.29%, the lowest since the end of March.

In Europe, the spectre of a chaotic situation following Sunday's election results has largely receded, and benchmark eurozone bond yields ended the day lower on Wednesday.

The yield on ten-year French bonds eased sharply back to around 3.14%, while the ten-year German Bund returned to 2.53%.

The dollar was buoyed by the latest forecasts from Fed officials, which removed the prospect of a rapid cut in key rates, allowing the euro to climb back up to 1.08 against the greenback.

The oil market remains on a downward trend after figures from the Energy Information Administration (EIA) showed a rise in US crude inventories.

Brent crude is down 0.4% at $82.3 a barrel, as is West Texas Intermediate (WTI), which is down at $78.2.

Investors' attention will now turn to US producer prices, to be published at 2:30 p.m. at the same time as jobless claims figures.

The session promises to be poor in terms of macroeconomic indicators on the Old Continent, but the publication of industrial production in the euro zone and inflation in Spain will nonetheless liven up the morning.

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