CAC40: closes stable ahead of a string of statistics

(CercleFinance.com) - The Paris Bourse ended the session with no direction (0.
1% gap), 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 3.1 billion euros traded.510, before falling back to 7,500... with less than 3.1 billion euros traded.

The Paris market has virtually returned to positive territory over the year, posting a decline of only 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.

US indices are starting Q4 with symbolic gains of +0.1% to +0.2%, but new all-time highs could be set as early as tonight for the Dow and S&P.

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.

While the onset of a monetary easing cycle in the absence of a recession is generally a positive factor for equities, 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 index of overall activity in the eurozone fell 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, however, Bunds are easing by -5pts on Bunds (to 2.1700%), -2.5pts on our OATs at 2.947% and -5pts on Italian BTPs.

Gold remains at its zenith at 2.625/Oz, oil takes +0.5% towards $75.1 on 'Brent', the Euro gives up -0.3% against the Dollar towards 1.1130 (strong rise in the greenback's yield).

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