CAC40: cautious opening before Fed verdict

(CercleFinance.com) - The Paris Bourse is likely to see little change on Wednesday morning, after its gains of recent sessions, in markets paralyzed just hours before the Fed's eagerly-awaited decisions.


At 8.15am, the 'future' contract on the CAC 40 index - for delivery at the end of September - was down 3.8 points at 7494.8, suggesting that the opening will be little changed.

While the Federal Reserve is expected to formalize the end of its restrictive monetary policy this evening by announcing its first rate cut since March 2020, bets remain tight ahead of its statement.

Falling inflation and the slowdown in the US labor market argue in favor of an easing, but resilient growth argues in favor of a limited reduction in the cost of money.

According to CME Group's FedWatch tool, following recent statements by several Federal Reserve officials, the markets consider the probability of a 50-point rate cut tonight to be 63%.

However, the hypothesis of a smaller 25-point cut has not yet been completely ruled out, as it is still considered credible by 37% of market participants.

However, in view of the recent rally in world stock markets, a 75-basis-point cut already seems to be widely accepted.

In Paris, the CAC 40 index gained more than 0.5% to 7,487.4 points last night, giving it a 1.8% rise since September 6.

On Wall Street, both the Dow Jones and the Nasdaq set new all-time highs yesterday.

But with expectations so high, the risk of disappointment is just as great.

'Historical data suggests, however, that equity markets perform better after an initial rate cut of 25 basis points than 50', point out Barclays' strategists.

In fact, beyond the decision that will be taken this evening at 8:00 pm, investors are mainly wondering about the evolution of rates over the coming months.

In the meantime, investors will have taken note of the latest figures for the euro zone and the UK in the morning.

In the USA, the latest housing indicators will be published in the early afternoon, namely building permits and housing starts.

The possibility of a strong move by the Fed continues to penalize the dollar, even though the euro now seems to be stalling a little against the greenback, trading at around 1.1125.

While the greenback's fall had favored black gold prices, Brent and US light crude are back down by around 0.6% this morning, at around $73.3 and $70.7 a barrel respectively, pending the publication this afternoon of US weekly inventories.

On the bond front, the prospect of a rate cut on both sides of the Atlantic is pushing the yield on the ten-year German Bund down to 2.14%, while that on US paper is stabilizing at around 3.64%, still at its lowest level since May 2023.

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