CAC40: neither volatility nor volume, rates under pressure

(CercleFinance.com) - The Paris Bourse had recovered 0.
5% on Tuesday, but lost it again today (CAC40 down 0.57% at close to 7,445): the scores have been frozen since midday: in fact, everything seems to have been frozen for 4 sessions.

In principle, investors have been back from vacation for the past 15 days, but volumes have not picked up and less than 1.2MnsE has been traded.

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

While the Federal Reserve will make official tonight 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 completely 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 1,356.000 on an annualized basis, following a 6.9% fall in July (revised from an initial estimate of -6.8%).

Today's 'number' also points to more robust activity: building permits for US homes - thought to foreshadow future housing starts - climbed by 4.9% to 1,475,000 last month, while housing deliveries rose by 9.2% to 1,788,000.788,000.

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 "in the cards": the yield on '2034' T-Bonds rose by +5pts to 3.6940%, while the '2-year' gained +6.1pts to 3.6530%.

In Europe, the ten-year German Bund is up +4.5 basis points to 2.1900%, while our OATs are up +5.6 basis points to 2.9160%, Italian BTPs +7 basis points to 3.5750%. Lastly, Spanish Bonos, with +6Pts, returned to the 3.000% threshold.

Although the fall in the greenback had favored black gold prices, Brent and US light crude are back down by around 0.3% at around $73.3 and $70.7 (barrel of WTI) respectively.

The euro is up 0.05% at 1.1120, erasing the previous day's decline. Finally, the ounce of gold remains stuck at $2570, 0.4% off its all-time high.

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