CAC 40: attempt to rebound on the eve of US inflation

(CercleFinance.com) - After two sessions of declines, the Paris Bourse should try to move forward again in early trading on Tuesday morning, even if the imminent publication of monthly US inflation figures could somewhat limit risk-taking.


At around 8:15 a.m., the future contract on the CAC 40 index - for delivery at the end of January - was trading at 7,475.5 points, up 63.5 points, suggesting a green opening.

The Paris market ended the first session of the week with a limited decline of 0.3% to 7,408 points, after losing up to 1% during the morning.

On Wall Street, the US equity markets ended in mixed order on Monday, with the major New York indices ending the day with limited gains.

At the final bell, the Dow Jones was up 0.9%, the S&P 500 nibbled at 0.2%, while the Nasdaq was down 0.4%.

"This is a classic example of how an adverse reaction to employment figures never lasts very long", commented Danske Bank analysts.

That's why we see the recent strong economic indicators in the US as a positive factor for equity markets, even if they haven't performed very well recently", stresses the Danish bank.

A wait-and-see attitude is likely to dominate trading today, however, with investors wary of taking too many risks ahead of tomorrow's release of US consumer price figures, which could provide clues as to the Fed's interest rate path.

Retail sales for the month of December, due on Thursday, will also offer an interesting insight into the current state of the economy across the Atlantic.

If one-year core inflation exceeds the consensus of 3.3% and retail sales grow less than the 0.6% the market is hoping for, expectations of a slowdown in Fed rate cuts will strengthen, supporting the dollar and pushing the yield on ten-year Treasuries above the 4.80% mark", warns Michael Brown, strategist at Pepperstone.

Today's 2.30pm release of US producer price figures for December will give investors a first idea of what to expect tomorrow with the CPI index.

Analysts believe, however, that market participants may be reluctant to build too large positions ahead of Donald Trump's inauguration as the 47th US President next Monday.

Caution seems all the more warranted in view of the fact that the New York businessman has so far remained rather evasive about the scale and scope of the customs taxes that will be introduced after his installation in the White House.

On the bond market, the rise in US long rates continues, with the yield on ten-year US T-Bonds peaking above 4.80%, the highest since October 2023.

Yield pressures are not confined to US bonds, as the yield on ten-year Bunds has risen above 2.68%, while that on French OATs of the same maturity has climbed 3.5 points to 3.46%, pushing the France/Germany spread up to over 87.5 basis points.

On the currency front, the euro has managed to climb back above 1.0250 against the dollar, to return to around 1.0260.

Oil prices are consolidating a little after their recent uptrend, which took a barrel of US light crude (WTI) over the $80 mark for the first time since last August.

Following the new sanctions imposed by Washington on the Russian energy sector, investors are thinking that India and China, among others, will have to find new sources of supply.

This morning, WTI is down slightly by 0.6% at $78.4, while North Sea Brent is down 0.6% at $80.5.

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