CAC40: no management, no reaction to Bercy appointments

(CercleFinance.com) - No reaction to the formation of a new government, with Antoine Armand and Laurent St Martin at Bercy: it's a 'non-event'.

The Paris Bourse ended the day without direction (a gap of less than 0.1%), but the momentum of 2 previous weeks of gains (including +0.7% last week) remains intact.
The CAC 40 index - which has now switched to the October timeframe - initially posted a 0.5% decline to 7,460 points, before recovering gently to 7,510, before falling back to 7,500... with less than 1.5 billion euros traded.

The Paris market has virtually returned to positive territory for the year, posting only a decline of around 1% since January 1.

Optimism has also returned to Wall Street, where the Dow Jones and S&P 500 hit new all-time highs last week in the wake of the Fed's 50 basis point rate cut.
The US indices have begun the 4th quarter with symbolic gains of +0.1% to +0.3%, but by doubling these scores, new all-time highs could fall as early as this evening for the 'Dow' and the 'S&P' (+0.3%).

But strategists warn that this upturn should not lead to excessive euphoria.

In view of recent earnings warnings (Mercedes-Benz, FedEx), the sluggishness of the Chinese economy and current high valuations, investors may well be tempted to take profits.

Admittedly, the onset of a monetary easing cycle in the absence of a recession is generally a positive factor for equities, but the uncertainty surrounding the next rate cuts by the major central banks could trigger a relapse in the equity markets.

All the more so as the week ahead looks set to be a busy one, with the possibility that the numerous statistics on the agenda over the next few days will bring stock market indices back down to earth.

The first day of the week is dominated by the preliminary findings of PMI surveys in Europe and the US: growth in the US private sector slowed very slightly in September, according to the S&P Global composite PMI, which came in at 54.4 in flash estimates, after 54.6 in final data for the previous month.
Growth in US private-sector activity in September was underpinned by sustained, albeit slightly decelerating, growth in services, while the decline in manufacturing output slowed

In Europe, the HCOB flash composite PMI for overall activity in the eurozone dipped below the 50 mark unchanged for the first time in seven months in September, settling at 48.9 versus 51 in August.

In France, activity in the services sector contracted again in September, reflecting the end of the Olympic Games, according to the preliminary results of purchasing managers' surveys published this Monday by HCOB and S&P.

The 'flash' PMI index measuring the tertiary sector fell to a six-month low this month, at 48.3 compared with 55 in August, falling back below the 50-point mark separating growth and contraction in activity.

Also on the week's agenda, the Ifo business climate index in Germany due tomorrow, and the latest inflation figures in France and Spain due on Friday.

The market will also continue to keep a close eye on inflation, with Friday's headline reading the PCE consumer price index in the USA for August.

Closely watched by the markets and the Fed, this index should show a continuation of the disinflation process, thanks to the ongoing fall in gasoline prices.

With this statistic, investors will be looking for confirmation that the positive trend of a soft landing, marked by slowing inflation and more moderate growth, is indeed taking shape for the US economy.

In the meantime, bond markets continue to deteriorate, with T-Bonds up 7 points to 3.797%, and 30-year bonds up 6 points to 4.133% (which is bad news for real estate, with transactions falling to 40-year lows).
In Europe, Bunds are easing by 5 points to 2.1700%, our OATs by 2.5 points to 2.947%, and Italian BTPs by 5 points.

Gold remains at its zenith at $2,625/Oz, oil is up +0.5% at $75.1 on 'Brent', and the Euro is down -0.3% against the Dollar at 1.1128 (sharp rise in the greenback's yield).

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