CAC 40: the mood turns gloomier

(CercleFinance.com) - The Paris Bourse is set to continue its sharp decline of the previous day, as it awaits the eagerly-awaited decisions of the European Central Bank (ECB).


At around 8:15 a.m., the 'future' contract on the CAC 40 index - October delivery - dropped 82 points to 7450.5, suggesting a decline of around 1% at the opening.

The Paris market had lost more than 1% to 7522 points on Tuesday, affected - like the rest of the world's stock markets - by ASML's surprise profit warning late in the session.

The Euro STOXX 50 fell by 1.8% in the wake of the warning issued by the Dutch manufacturer of equipment for the semiconductor industry, which was itself down 15% at the end of trading.

A London-based trader commented: "It has to be said that the company's performance was frankly poor, with order intake in the third quarter coming in at just 2.6 billion euros, half of what the consensus was expecting.

The publication last night of third-quarter results for French luxury goods giant LVMH added to the gloomy climate, with sales coming in below market forecasts.

In New York, US equity markets were also hit by the ASML effect, with losses ranging from 0.7% to 1% at last night's close.

"I continue to see these bouts of weakness as buying opportunities, bearing in mind that all the downward movements we've seen recently have proved short-lived", stresses the London-based trader.

However, investors should be wary of getting too involved on the eve of the European Central Bank's (ECB) monetary policy meeting.

The ECB is expected to cut interest rates again tomorrow, as Germany's difficulties threaten growth across the eurozone.

The economic agenda looks to be relatively light on Wednesday, although retail sales, business inventories and import prices will be among the highlights of the session.

In the UK, consumer price figures should show that inflation is now well and truly back below the Bank of England's 2% target.

On the bond market, the climate of risk appetite that had prevailed since the start of the week was dampened last night by ASML's 'warning', leading to a return to government bonds.

The yield on the ten-year German Bund eased by four basis points to 2.23% and that on French OATs by eight points to 2.96%, while T-Bonds of the same maturity erased eight basis points below 4.04%.

On the oil market, Brent crude is attempting to rebound by 0.2% after its correction of recent sessions, due to the downward revision of OPEC demand forecasts and Israel's promise to strike only Iranian military positions.

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