CAC 40: caution before the big inflation meeting

(CercleFinance.com) - The Paris Bourse is set to open with little direction on Wednesday, in a cautious mood ahead of the release of new US inflation data and tomorrow's meeting of the European Central Bank (ECB).


At around 8.15am, futures on the CAC 40 index - expiring at the end of September - were down 12.5 points at 7404 points, heralding a negative start to the session in line with the previous day's trend.

While the Paris market had lost more than 0.2% yesterday, to 7407 points, the Nasdaq managed on Tuesday to post a second consecutive session of gains, its first in almost a month, by recovering 0.8%.

To confirm this nascent rebound, all eyes will turn at 2.30pm to the publication of the US consumer price index (CPI) for August, which should confirm the gradual slowdown in inflation.

The CPI increase is expected to be stable at 0.2% compared with the previous month, as is the closely watched underlying inflation rate, which is also expected to remain unchanged at 0.2%.

This data is all the more crucial as it comes a week before the Fed's next monetary policy meeting.

Given that the market is still torn between a quarter-point or half-point rate cut on Wednesday September 18, these figures could have a major impact on investor expectations.

Even if market participants are now more concerned about developments in the labor market, a further deceleration in inflation would bolster the case for further monetary easing.

According to CME Group's Fedwatch barometer, traders currently have a 65% probability of a 50 basis point cut and a 35% probability of a 50 basis point drop.

Investors will also be watching Wall Street's reaction to the first debate between the two candidates in the US presidential election, in which Democrat Kamala Harris appears to have been more convincing than her Republican rival, Donald Trump.

According to a poll cited by Danske Bank analysts, the US vice-president largely dominated this first televised duel ahead of the November 5 vote, with 55% of viewers awarding her victory against 45% for the Republican candidate.

By way of comparison, in a poll conducted prior to the confrontation, Kamala Harris only garnered 49.5% of voting intentions, compared with 50.5% for the New York businessman.

'While Trump focused on the failures of the current administration, Harris unveiled a more forward-looking vision', deciphered the Danske Bank teams.

Where Trump's speech lacked clarity about his plans on key issues such as immigration, Harris stood out for her firm positions on abortion, the rule of law and foreign policy vis-à-vis the wars in Ukraine and Gaza', the strategists add.

"The general tone of Trump's remarks appeared dark and threatening, while Harris appeared more optimistic about the future", concludes the Danish establishment.

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