CAC 40: towards a calm session as the holiday season draws to a close

(CercleFinance.com) - The Paris Bourse is set for a relatively quiet session on Monday, at the start of a week cut short by the Christmas holidays.


At around 8.15 a.m., the future contract on the CAC 40 index - traded on the January timeframe - was down 0.5 points at 7,287.5 points, suggesting that the opening will be at, or close to, a standstill.

While equity markets traditionally tend to rise in the last few sessions of the year, investors don't seem to be expecting much this time around.

The CAC 40 is currently down 3.5% for the year, making it one of the worst performers in Europe for 2024.

This underperformance comes against a backdrop of recurring political uncertainty, which has led investors to steer clear of French equities over the past six months.

Given that the holiday season is usually marked by calm activity, the Paris market is likely to find it hard to catch up by December 31 and launch an unlikely end-of-year rally.

The CAC 40 index lost a further 1.8% last week, breaking through the 7,400 and 7,300 point thresholds in turn, leading analysts to anticipate a consolidation of positions before a possible rebound.

In a recent note, Saxo Banque's teams nevertheless felt that positive signals were beginning to emerge for the Paris index.

"The CAC 40 has managed to preserve the critical 7,100 point support and could benefit from favorable overall dynamics", judges the Danish bank.

In particular, the massive stimulus measures announced by China, coupled with a shift towards a more accommodative monetary policy, could offer significant support to the markets", continues Saxo.

In addition, the fall in the euro could provide support for European exports, partly offsetting the potential impact of the US tariffs announced by the Trump administration", adds the Scandinavian bank.

Saxo also points out that stock market valuations in Europe remain more attractive than those in the US, where they are now reaching record highs.

"This attractiveness, combined with the expected support of the European Central Bank, which is planning an aggressive rate cut throughout 2025, could be a key catalyst for stimulating the economy against a backdrop of gradually falling inflation", notes the Danish bank.

"Finally, although political risk remains a key factor embedded in current valuations, significant upside potential could be unlocked through improved earnings momentum, greater political clarity and a more favorable economic environment", it concludes.

Before turning their attention to 2025, market participants will today be looking at the small handful of US indicators on the agenda.

Expected are the Conference Board's consumer confidence index, durable goods orders and new home sales.

The week ahead should prove particularly quiet, however, as the Paris Bourse will close its doors tomorrow at 1:00 p.m. and not reopen until Friday.

With Christmas and New Year's falling in the middle of the week, trading volume could be much lower than in other years, as many traders will have taken a week off.

On the bond market, the US 10-year yield fell back to 4.52% following accommodating comments made on Friday by Austan Goolsbee, President of the Chicago Federal Reserve.

According to him, the level of "neutral rates" would be well below current levels, meaning that the Fed would have to lower its key rate "significantly" over the next 12 to 18 months.

This has rekindled speculation of three rate cuts next year, a prospect which helped the Dow Jones rally 1.2% on Friday and the Nasdaq gain a little over 1%.

On the foreign exchange market, largely deserted in the run-up to the festive season, the euro was broadly stable against the dollar at around 1.0440.

After last week's decline, the two benchmark oil contracts advanced slightly, with North Sea Brent up 0.4% to $73.2 a barrel and US light crude (WTI) up 0.5% to almost $69.8.

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