CAC 40: caution prevails ahead of a salvo of US indicators

(CercleFinance.com) - The Paris Bourse is set to continue its downward trend on Wednesday morning, as the day ahead of the US Thanksgiving holiday is marked by an impressive array of US indicators.


At around 8:15 a.m., the future contract on the CAC 40 index - expiring in December - dropped 26 points to 7,179 points, pointing to a continuation of the previous day's downward trend.

Destabilized by Donald Trump's threat to introduce new tariffs, the Paris market had ended yesterday's session with a loss of 0.9% at 71974 points, falling back below the 7200-point threshold.

Some analysts nevertheless point to the limited reaction of the world's stock markets to the latest remarks made by the US President-elect, citing a feeling of "déjà vu" following the climate of trade war that had already characterized his previous term in office.

Europe was largely absent from Trump's threats yesterday, preferring instead to focus on countries such as Mexico, Canada and China", commented one trader.

Investors will have to prepare for an economically focused session on Wednesday, with numerous statistics expected across the Atlantic on the eve of the Thanksgiving holiday.

Knowing that Wall Street will be closed tomorrow and will only reopen for half a day the following day ('Black Friday'), it's as if the stock market week ended today", says the trader.

The second estimate of US gross domestic product (GDP) is expected to confirm that US growth expanded at a solid annualized rate of 2.8% in the second quarter.

At the same time, investors will be keeping a close eye on data on household income and spending, which incorporate the PCE price index, the Fed's preferred measure of inflation.

These figures could reinforce or, on the contrary, weaken the scenario of a rate cut in December, currently estimated by market operators at 66% according to the Fed's FedWatch barometer.

Unsurprisingly, the minutes of the Federal Reserve's latest meeting - published yesterday evening - showed that the US central bank had not predefined any particular path for its monetary policy, but that it remained as dependent as ever on the evolution of economic statistics.

However, these "minutes" did not stop Wall Street, which set a new deluge of records last night, with the Dow Jones and S&P 500 closing Tuesday's session on new all-time highs.

After Monday's air pocket, the yield on 10-year US Treasury bonds regained some ground, above 4.30%, while its German equivalent for the same maturity was virtually unchanged at 2.18%.

However, yesterday's session was marked by a new divergence between German Bunds and French OATs, with the spread now reaching 87 basis points, its worst score since dissolution on May 9.

The dollar rallied as Treasuries yields recovered, as investors realized that Trump's trade policy will prove inflationary by raising the price of imported goods.

The euro took advantage of this to return to the 1.05 zone against the greenback.

On the energy front, the oil market seems little affected by the entry into force of a ceasefire in Lebanon after two months of conflict between Hezbollah and Israel

Brent crude is up 0.3% at almost $73, while US light crude (West Texas Intermediate, WTI) is also up 0.2% at $68.9.

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