The Paris Stock Exchange is poised for an uncertain trading session as investors anticipate key events, including U.S. inflation data and an ECB meeting. The CAC 40 index futures indicate a flat start, following a 1.1% decline the previous day. Analysts express concerns over negative fundamentals affecting multinational companies and a high valuation for the CAC. Meanwhile, U.S. markets dipped ahead of inflation reports, with expectations of a potential rate cut from the Federal Reserve and ECB. Oil prices are rising as the market awaits U.S. stock data.
Market Outlook: Paris Stock Exchange Remains Indecisive
The Paris Stock Exchange is set to commence trading on Wednesday without a definitive trend, as investors gear up for a busy schedule later in the week. Key events include the release of inflation statistics from the United States and an upcoming meeting of the European Central Bank (ECB).
As of 8:15 AM, the futures contract for the CAC 40 index, expiring in December, is trading at 7400.5 points, reflecting a slight decrease of 3.5 points. This suggests a nearly flat opening for the session.
Recent Trends and Analyst Insights
Yesterday, the Paris market closed down by 1.1% at 7394 points, following a period of consolidation after eight consecutive sessions of gains. Since hitting a low on November 27, the CAC has rebounded by 3.5%, yet it remains approximately 2% lower year-to-date, significantly lagging behind the Euro STOXX 50 index which has risen over 9% during the same timeframe.
In a recent analysis, strategists from Goldman Sachs noted that the Paris Stock Exchange’s recent struggles do not necessarily enhance its attractiveness, citing negative fundamentals impacting its performance. They pointed out that major multinationals are facing challenges due to sluggish activity in China, while small and medium enterprises are dealing with ongoing political uncertainties.
Goldman Sachs also highlighted that the CAC’s current valuation appears high compared to historical norms. Other institutions, such as Crédit Mutuel AM, have echoed this sentiment, describing a precarious medium-term outlook compounded by an anticipated political crisis that could extend until next July, when new legislative elections might take place.
Meanwhile, U.S. stock markets also dipped on Tuesday, reflecting a cautious stance ahead of today’s consumer price index release for November. These inflation figures are particularly significant as they come amid rising inflation trends and mixed signals from recent employment data.
Market predictions, according to the CME’s FedWatch tool, indicate an over 86% likelihood of a further rate cut by the Federal Reserve in the coming week. Additionally, the market is closely watching the ECB, which is expected to announce a 25 basis point cut in its main interest rates tomorrow.
Analysts suggest that a key focus of the ECB meeting will be the revision of economic forecasts, especially the eurozone’s growth estimate, currently projected at 1.3% for 2025. A potential upward adjustment could signify a shift towards more aggressive monetary easing.
Patrick Barbe from Neuberger Berman warns that if the ECB modifies its language regarding maintaining restrictive rates, it may signal a new objective aimed at swiftly reducing key rates to neutral levels.
In anticipation of these announcements, the bond market remains stable, with the yield spread between ten-year German Bunds (2.12%) and OATs of the same maturity (2.88%) holding steady at 76 basis points. On the other hand, ten-year U.S. Treasury yields are stabilizing around 4.22%, ahead of the inflation report.
In the energy sector, oil prices continue to show an upward trend as the market awaits the release of weekly U.S. oil stock data later today. Brent crude is currently up by 0.7% at $72.7, while Texas WTI is experiencing a similar increase, trading above $69.