CAC40: down as rates tighten ahead of FOMC meeting

(CercleFinance.com) - The Paris Bourse had recovered 0.
5% on Tuesday, but is now losing it again (CAC back below 7,450), with the weekly result coming in at -0.2%: in reality, everything seems to have been frozen for the past 4 sessions.

In principle, investors have been back from vacation for the past 15 days, but volumes have not picked up and less than 900MnsE has been traded in 7 hours.
The mood is just as wait-and-see for the E-Stoxx50 (-0.5%), with Frankfurt faring best with a stagnation (compared with -0.5% this morning).

On Wall Street, indices have been paralyzed for the past 3 days, with gaps of between +0.05 and -0.05% the previous day, and identical behavior this Wednesday, with the Nasdaq posting between 0.00 and 0.1%, and the S&P500 at zero.

While the Federal Reserve will this evening formalize the end of its restrictive monetary policy by announcing its first rate cut since March 2020 (the 'pivot' was expected 9 months earlier), bets remain tight ahead of its statement.

Falling inflation and the slowdown in the US labour market argue in favour of easing, but the resilience of growth argues in favour of a limited reduction in the cost of money.

Following recent comments 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.

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

The Commerce Department yesterday reported a sharp 9.6% rebound in US housing starts in August compared with the previous month, to an annualized rate of 1,356,000, following a 6.9% fall in July (revised from an initial estimate of -6.8%).
The 'number' of the day also points in the direction of more robust activity: building permits for US homes - supposed to foreshadow future housing starts - climbed by 4.9% to 1,475,000 last month, and housing deliveries rose by 9.2% to 1,788,000.

There were also eurozone figures this morning: the eurozone's annual inflation rate slowed from 2.6% in July to 2.2% in August, according to Eurostat, which thus confirms its flash estimate for last month, while that of the European Union also fell by 0.4 points to 2.4%.

On the bond front, the prospect of a rate cut on both sides of the Atlantic seems to be 'in the air': the yield on '2034' T-Bonds rose by +4.5pts to 3.6900%, while the '2-year' gained +5pts to 3.6440%.

In Europe, the ten-year German Bund is up +4 basis points to 2.184%, while the OAT is up +6 basis points to 2.9200%, and Italian BTPs are up +7 basis points to 3.5750%.
Finally, Spanish bonds are up +6 basis points to 3.000%.


While the fall in the greenback had favored black gold prices, Brent and US light crude are back down by around 0.3% to around $73.3 (Brent) and $70.7 (WTI) respectively, pending this afternoon's release of US weekly inventories.

The euro is up 0.1% at 1.1125, erasing the previous day's decline.
Enfon, the ounce of gold remains stuck at $2573, 0.4% off its all-time high.

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