Paris Stock Exchange opened lower, continuing a downward trend amid Federal Reserve changes and concerns about Europe’s economy. The CAC40 index fell 1.1% to approximately 7210 points, reflecting a 2.7% drop over the week. Moody’s downgrade of France’s rating heightened worries about political instability. Wall Street also declined, influenced by investor anxiety and upcoming inflation data. Meanwhile, the euro is recovering against the dollar, gold prices dipped, and crude oil continues to decline.
Paris Stock Exchange Experiences Setback
The Paris Stock Exchange kicked off the session on a downward note this Friday, following another week of declines. This shift comes amid a change in tone from the Federal Reserve in the United States and growing concerns about the economic health of Europe. The CAC40 index has seen a drop of 1.1%, settling around 7210 points.
Market Volatility and Economic Concerns
This week has proved to be quite turbulent, primarily due to the less accommodating remarks from Jerome Powell, the Federal Reserve chairman. His comments have unsettled market expectations regarding the timing of potential interest rate cuts. In this final full week of the year, with Euronext set to partially close for the upcoming Christmas festivities, the CAC is down approximately 2.7%.
The Paris index has recently slipped below significant psychological barriers of 7400 and 7300 points, marking a potential second consecutive weekly decline. Christopher Dembik, an investment strategy advisor at Pictet AM, expressed his concerns earlier this week, stating, “The times are tough… And nothing suggests optimism, for now.”
Adding to the uncertainty, Moody’s has downgraded France’s sovereign rating, leading many to expect ongoing political instability in the country into 2025. Recent PMI data has further fueled worries about growth within Europe. The European Central Bank’s latest forecasts indicate only a modest 0.2% increase in Eurozone GDP for the fourth quarter.
Wall Street is also feeling the effects of heightened investor anxiety, with the Dow Jones currently down 3.4% since the start of the week. Attention will turn to the inflation theme and monetary policy developments this Friday, particularly with the publication of the PCE price index at 14:30, which is the Fed’s preferred inflation measure.
Market participants are predominantly anticipating a rate cut in March, following a pause in January. However, any signs of persistent inflation may push expectations for rate cuts further down the line. Additionally, the issue of a potential budgetary crisis looms large, as a proposal was rejected by the Republican-controlled House of Representatives. Lawmakers face a midnight deadline to prevent a federal government shutdown.
Today is also designated as “quadruple witching,” a day characterized by the expiration of various options and derivatives contracts on indices and stocks, which is likely to contribute to market volatility.
In the foreign exchange arena, the euro is attempting to recover against the dollar, trading around 1.0380 after experiencing pressure this week. The yield on 10-year Treasuries has surged to 4.59%, marking its highest point since the end of May, with similar trends observed in the European bond market; the yield on 10-year German bonds has surpassed 2.30%, while French bonds are tightening around 3.11%.
In this climate of market unease, even gold has dipped to one-month lows, although it has seen a slight rebound of 0.4% this morning, reaching $2,618.8. Meanwhile, crude oil prices are also on the decline, with U.S. light crude falling below the $70 mark and Brent crude trending back towards $72.5.