CAC 40: investors return to a more cautious stance

(CercleFinance.com) - The Paris Bourse is set to open on a bearish note on Friday morning, pending the publication of several key economic indicators, prompting investors to adopt a more cautious stance.


At around 8:15 a.m., the November futures contract on the CAC 40 index was down more than 38 points at 7272.5, suggesting that the session could start in the red.

Yesterday, the Paris market managed to post its biggest gain of the week, climbing 1.3% to 7311 points.

The first part of the week had been marked by a pronounced underperformance by European equities, penalized by arbitrage in favor of their American counterparts boosted by the Trump Trade.

While the S&P 500 has risen by 5% since the November 5 presidential election, the Euro STOXX 50 index has remained largely unchanged.

However, this differential has tended to fade of late, and the CAC is now down an anecdotal 0.4% on the week.

Nevertheless, market participants should remain cautious this Friday as they await a new series of statistics, perhaps in the hope of catching up with Wall Street.

In particular, they will be looking for the latest US retail sales figures, which will tell them more about the health of US household consumption in the run-up to the festive season.

However, the month of October was characterized by hurricane-related disruptions and pre-election uncertainty, which could weigh punctually on activity.

Indicators for the industrial sector and import prices will also be released before Wall Street opens.

Indicators showing the resilience of the US economy could dampen enthusiasm for US equities, lest this prompt the Federal Reserve to curb its rate cuts.

In the meantime, traders have been reassured by the latest Chinese indicators, which reflect relative dynamism in the economy.

Beijing announced that retail sales of consumer goods rose by 4.8% year-on-year last month, compared with 3.2% in September, driven by purchases of household appliances, furniture and automobiles, and against the backdrop of the country's economic stimulus program.

Another important indicator was the 5.3% rise in industrial production in China last month, according to official data published on Friday.

On the Tokyo Stock Exchange, the Nikkei index was up 0.2% at the end of the day, while Hong Kong's Hang Seng index was also up 0.2%.

In New York, consolidation prevailed again on Wednesday evening - albeit with little intensity - as declines ranged from 0.5% on the Dow Jones to 0.6% on the S&P 500 and Nasdaq at the final bell.

Investors showed little reaction to the latest statements by Fed Chairman Jerome Powell, who at a conference in Dallas described a vigorous US economy against a backdrop of controlled inflation, reinforcing the 'Goldilocks' narrative that usually delights Wall Street.

However, the Federal Reserve chief made it clear that the world's leading economy was not sending out any signals that monetary easing was being rushed.

These comments fuelled speculation about a possible 'status quo' between now and the meeting at the end of January and Donald Trump's inauguration, leading to some disappointment in the fixed-income markets.

On the US bond market, benchmark yields rose sharply last night to their highest levels since early July, with ten-year paper topping 4.45%.

Although bond yields tended to ease this morning, they are likely to remain a key determinant of stock market trends over the coming weeks.

Volatility could also be the order of the day on this so-called "three witches' day", marked by the expiry of numerous futures and options contracts.

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