The Paris Stock Exchange is set for a positive session ahead of the European Central Bank’s monetary policy announcement, with the CAC 40 index futures up significantly. Analysts anticipate a sixth rate cut to support the weakening economy, while ECB President Christine Lagarde’s comments are highly anticipated. Additionally, rising bond yields and upcoming earnings reports from major European companies are in focus, alongside a strong euro and positive movements in U.S. stock markets and oil prices.
Paris Stock Exchange Anticipates Further Gains
The Paris Stock Exchange is poised for another positive session on Thursday morning, just ahead of the eagerly awaited European Central Bank (ECB) monetary policy decisions. As of 8:15 AM, futures for the CAC 40 index are showing a promising increase, up 99.5 points to reach 8285.5 points, indicating a continuation of the robust rally of 1.6% observed the previous day.
Key Highlights from the ECB Meeting
The session’s focal point will be the ECB’s announcement at 2:15 PM, which is anticipated to include a sixth rate cut since June 2024, designed to bolster a sluggish European economy. Market participants have largely factored in a quarter-point reduction and are keenly awaiting insights from ECB President Christine Lagarde during her customary press conference.
According to François Rimeu, strategist at Crédit Mutuel Asset Management, the governing council’s challenge lies in clarifying the stance on the current restrictiveness of its monetary policy. Some analysts suggest that the policy can no longer be labeled as ‘restrictive’, hinting at a potential slowdown in future rate cuts.
Lagarde will need to navigate her comments carefully to prevent any adverse reactions in sovereign rates, especially after Germany’s new ‘whatever it takes’ strategy, which has been indicative of a surprising resurgence in policy dynamism under future Chancellor Friedrich Merz. Merz has even raised questions regarding the ‘debt brake’ enshrined in the Constitution, which could lead to significant economic stimulus through increased debt.
This shift has caused the yield on ten-year German Bunds to spike to 2.80%, marking a peak not observed since late 2023. Investors will closely monitor bond yield trends while also preparing for a flurry of earnings reports from European corporations.
The market is set for an active day, with earnings announcements from major companies like Deutsche Post, Merck KGaA, Universal Music Group, Reckitt Benckiser, Solvay, and Zalando. In the lead-up to the ECB meeting, the euro has demonstrated strength, surpassing the 1.08 dollar mark, buoyed by expectations of economic support measures in Germany and increased military spending across Europe. Since the start of the year, the euro has appreciated nearly 6% against the dollar.
On Wall Street, the New York Stock Exchange experienced a rebound on Wednesday evening, following disappointing economic statistics that reinforced the likelihood of a Fed rate cut in June. By the end of trading, the Dow Jones and S&P 500 both rose by 1.1%, while the Nasdaq climbed 1.5%.
In the oil market, American light crude (WTI) is rebounding by 0.7%, trading above 66.8 dollars after a significant drop due to rising crude stock levels in the United States last week. Brent crude is following a similar upward trajectory, gaining 0.7% to reach 69.8 dollars. Meanwhile, gold prices are benefiting from dollar weakness, returning to 2,927.4 dollars an ounce, remaining close to its recent historical highs.