CAC40: little change ahead of ECB meeting

(CercleFinance.com) - The Paris Bourse began the session slightly down on Monday morning, with investors adopting a cautious stance ahead of Thursday's meeting of the European Central Bank (ECB).
The CAC40 index fell by 0.3% to 7556 points, with little change.

After a difficult summer, the world's stock markets have returned to the upside over the past two months, buoyed by the prospect of decisions by both the Fed and the ECB likely to bolster economic activity.

Since August 6, the CAC40 has rallied by more than 6%, a favorable trend which should persist ahead of the ECB's monetary policy decisions to be announced on Thursday.

Many observers believe that the poor European figures published recently - led by the PMI - should prompt the Frankfurt-based institution to accelerate its rate cuts.

With the disinflation process continuing, ECB rate cut expectations now point to the prospect of a further 25 basis point rate cut this week, followed by another in December.

"Fiscal policies are taking a restrictive turn", points out Bruno Cavalier, Chief Economist at Oddo BHF.

"Under these conditions, why maintain a restrictive monetary policy?asks the analyst.

The earnings season, which kicked off last Friday with the major US banks, should also set the pace for the coming sessions.

This week's agenda includes, among others, publications from Dutch semiconductor equipment giant ASML and video-on-demand platform Netflix.

In addition to central banks and earnings, US retail sales figures, due on Wednesday, are also likely to move markets.

Investors' eyes will also turn to Beijing, from where Chinese gross domestic product (GDP) figures will be released on Thursday, giving valuable clues as to the state of the economy in the world's second-largest economy, which is currently undergoing a major stimulus plan.

On the bond market, the recent easing trend is confirmed as the yield on 10-year US government bonds - which had reached new highs since the end of July last week at 4.11% - fell back to 4.07% this morning.

Safe-haven Bunds remain in demand just days before the European Central Bank (ECB) monetary policy meeting, with Germany's benchmark ten-year yield back at 2.26%.

On the currency markets, the euro is virtually unchanged against the dollar, holding steady at around the 1.0930 mark, amid questions about the Fed's next rate cut and uncertainty surrounding next month's presidential election.

Oil prices are also little changed, with caution still the order of the day as we await a possible counter-attack by Israel following the recent strikes by Hezbollah.

Market participants nevertheless seem to continue to favor the idea that the retaliation will not target Iran's nuclear infrastructure, leading Brent crude to fall by 1.2% to $78.1 a barrel.

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