CAC40: little change before Fed verdict

(CercleFinance.com) - The Paris Bourse is close to equilibrium, with markets paralyzed just hours before the Fed's eagerly-awaited decisions.
The CAC 40 index was slightly down by 0.2% at around 7,470 points.

Although 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 the resilience of growth argues in favor of a limited reduction in the cost of money.

Following recent statements by several Federal Reserve officials, the markets estimate the probability of a 50-point rate cut tonight at 63%, according to CME Group's FedWatch tool.

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.

In view of the recent rally in world stock markets, a 75-basis-point cut nevertheless already seems to have been widely accepted by prices.

In Paris, the CAC 40 index gained more than 0.5% to 7487.4 points last night, giving it a 1.5% 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', Barclays strategists remind us.

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.

Meanwhile, in the morning, investors took note of the latest figures for the euro zone.

According to Eurostat, the eurozone's annual inflation rate fell from 2.6% in July to 2.2% in August, confirming its flash estimate for last month, while that of the European Union also fell by 0.4 points to 2.4%.

In the USA, the latest real estate indicators - building permits and housing starts - will be published early this afternoon.

The possibility of a strong move by the Fed continues to penalize the dollar, even if the euro now seems to be stalling a little against the greenback, trading at around 1.1130.

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 this afternoon's publication 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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