CAC 40: a note of caution as we await US employment figures

(CercleFinance.com) - The Paris Bourse is set to open slightly higher on Friday, in a climate of caution ahead of the release of the latest US employment figures, which will fuel debate on the timing of the Federal Reserve's next rate cuts.


At around 8:15 a.m., the future contract on the CAC 40 index - for delivery at the end of January - was down 14 points at 7,481.5, heralding a start to the session in negative territory.

The market is likely to remain relatively subdued as it awaits the release of the Labor Department's employment report at 2.30pm, a
statistic likely to have a decisive impact on the Fed's future monetary policy decisions.

Economists are forecasting an average of 170.000 new nonfarm payrolls in December, compared with 227,000 in November, with the unemployment rate remaining stable at 4.2%.

Investors are hoping that these figures will confirm the recent deceleration in the labor market and reinforce the scenario of further rate cuts by the Fed this year.

The various statistics published ahead of the employment report (ADP, the 'employment' component of ISM surveys) showed that hiring momentum was weakening in the US.

'The fact that the labor market is less and less tight will enable FOMC members to keep in mind the need to gradually converge towards greater monetary neutrality and therefore to continue cutting rates', explains Bastien Drut, Head of Strategy and Economic Research at CPR AM.

Nevertheless, with disinflation coming to a halt and uncertainty over the Trump administration's policies, the Fed will take its time", adds the analyst.

Furthermore, the news of the last few hours does not encourage much risk-taking, whether it be Donald Trump's very offensive speech on trade issues or the surge in UK bond yields.

After a particularly favorable 2024 vintage, especially for US equities, the risk of a stock market correction has increased at the start of 2025, warns Goldman Sachs.

According to the American bank, the probability of a stock market drop of at least 10% within three months and more than 20% within 12 months is now close to 30%, whereas it was still relatively low in the 4th quarter of 2024.

For the week as a whole, the CAC is currently up by just over 2.8%, after three out of four sessions ended in the green.

Closed yesterday for the day of national mourning observed in honor of President Jimmy Carter, who died at the end of last year at the age of 100, Wall Street is set to reopen lower on Friday, according to index futures.

On the bond market, the crisis situation persists in the UK, even though the yield on 10-year Gilts is back to 4.81% after peaking at 4.98% yesterday, not far from the critical 5% threshold.

The rate at which the country is indebted, however, remains at its highest level since the 2008 financial crisis.

On the currency front, the euro continued to fall against the dollar, dipping below 1.03, but the single currency could regain ground if US employment figures turn out better than expected.

The oil market is heading for a third consecutive week of gains, buoyed by rising demand despite fears of an economic slowdown and uncertainties over interest rate trends.

Brent crude is up 0.7% to nearly $77.5 a barrel, as is West Texas Intermediate (WTI), which is consolidating its gains since Wednesday's announcement of a drop in US inventories, bringing it back to around $74.5.

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