CAC40: little movement while awaiting Fed statement

(CercleFinance.com) - The Paris Bourse began the session slightly higher on Wednesday, a few hours ahead of the U.
S. Federal Reserve's eagerly-awaited interest rate decisions, the last major event of the year on the financial markets. The CAC40 index advanced by 0.3% to 7387 points, following a timid rebound (+0.1%) the previous day.

As is often the case prior to announcements by a major central bank, investors should avoid taking positions that are too clear-cut, so as not to find themselves stuck in the wrong direction.

The main event at the end of the year, the Fed will issue a statement this evening at 8:00 p.m. (Paris time) at the end of a two-day meeting of the FOMC, its monetary policy committee.

This will be followed half an hour later by a press conference by its Chairman, Jerome Powell.

Markets are almost certain to expect the Fed to cut its key rates by a quarter point, but uncertainty remains as to the evolution of their trajectory as we approach 2025.

Against this backdrop, investors will be studying the growth, inflation and rate forecasts of central bank officials in an attempt to fine-tune their expectations for the months ahead.

'We think Powell will try to adopt a neutral tone in his speech, but it is likely that his words will pave the way for a slowdown in rate cuts', predicts Danske Bank.

Yesterday's publication of solid consumer figures in the USA confirmed this scenario.

After last week's inflation figures, the fact that retail sales came in above expectations for the sixth month in a row is a further reason for the Fed to be more cautious in its rate-cutting cycle", says Bastien Drut, economist at CPR AM.

While awaiting the Fed's verdict, market participants will be following US housing starts and building permits figures at 2:30pm.

In the Eurozone, the market will be taking note of the final inflation figures for November, which should confirm the recent revival of price rises in the region.

Another reason for caution, Moody's announced last night that it had downgraded the debt of seven major French banks, including BNP Paribas and Crédit Agricole, following the downgrading of France's sovereign rating last Friday.

In New York, the main stock market indices finished lower on Tuesday, pushing the Dow Jones (-0.6%) down for the ninth consecutive session, the first time this has happened since 1945.

In a sign of the rotation in favor of major technology stocks against the backdrop of the AI explosion, the Nasdaq set new all-time highs before ending down 0.3%.

Eurozone government bond yields were little changed, with Bund yields easing by one point to 2.22% despite the vote of no-confidence against Chancellor Scholz.

French OAT yields stagnated at 3.03%, pushing the spread with Germany up to 81 points.

US ten-year yields also remained little changed at 4.38%.

The euro confirmed its current good form, returning to around 1.0510 against the dollar despite economic indicators reinforcing the scenario of a slowdown in Fed rate cuts.

The oil market rallied slightly ahead of this afternoon's release of U.S. crude inventories: Brent crude advanced 0.2% above $73.3 a barrel, while West Texas Intermediate (WTI) gained almost 0.3% near $70.3.

Copyright (c) 2024 CercleFinance.com. All rights reserved.