CAC40: benefits from a rebound before the Fed's decision

(CercleFinance.com) - The Paris Bourse rebounded in early trading on Tuesday, in a more optimistic market a few hours before the start of the Federal Reserve's two-day meeting.
The CAC40 index climbed 0.6% to 7,495 points, following the previous day's decline.

Yesterday, the market's main index ended the session down 0.2% at 7,449 points, after a long period of hesitation.

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

The US central bank, which will publish its statement tomorrow at 8:00 p.m. 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 that 67% of traders have assimilated according to CME's FedWatch tool.

'This is an important element, because since the beginning of 2009, the FOMC has never gone against the expectations established by the majority of the market at the start of a week marked by the Fed', notes Michael Brown, strategist at Pepperstone.

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

'Beginning 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 watched a little less closely.

On the Old Continent, the ZEW index of investor sentiment was published this morning. At +3.6, it was 15.6 points below its August value. In addition, the assessment of the economic situation in Germany continued to deteriorate, dropping 7.2 points to -84.5, its lowest level since May 2020.

In terms of interest rates, expectations of monetary easing are leading to a logical easing of 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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