Calm is anticipated in the Paris Stock Exchange as trading slows ahead of Christmas. The CAC 40 index shows a slight upward trend, but overall investor sentiment remains cautious due to a 3.5% year-to-date decline and ongoing political uncertainties. Analysts expect consolidation before any potential recovery, with recent positive signals emerging from global trends, including Chinese stimulus and favorable European valuations. Trading activity is expected to be low, with early market closures and a focus on U.S. economic indicators.
Calm Anticipated for the Paris Stock Exchange
The Paris Stock Exchange is set for a relatively tranquil trading session on Monday as the week is shortened due to the upcoming Christmas holidays. Early indications show that the future contract on the CAC 40 index for January is up by 0.5 points, standing at 7287.5 points, which suggests a stable opening, or close to it.
Market Trends and Economic Outlook
While it is common for stock markets to enjoy a rise during the final sessions of the year, investor sentiment appears cautious this time around. Currently, the CAC 40 has experienced a decline of 3.5% for the year, positioning it among the poorest performers in Europe for 2024.
This dip in performance comes amid ongoing political uncertainty that has led many investors to shy away from French stocks in the last six months. Given the typically subdued activity of the holiday season, the Paris market may face challenges in recovering lost ground before the year wraps up, making a year-end rally unlikely.
Last week, the CAC 40 further declined by 1.8%, falling below the critical thresholds of 7400 and 7300 points. Analysts are now anticipating a consolidation phase before any potential rebound. In a recent analysis, Saxo Bank pointed out that there are signs of positivity emerging for the Paris index.
“The CAC 40 has successfully held the crucial support level of 7100 points and might benefit from favorable global trends,” Saxo Bank noted. They highlighted the significant stimulus measures announced by China and a shift towards more accommodative monetary policies as potential boosts for the markets.
Additionally, the depreciation of the euro could aid European exports, which may help mitigate the effects of tariffs recently introduced by the Trump administration. Saxo Bank further indicated that European stock valuations remain more appealing compared to those in the United States, where valuations have peaked.
“This attractiveness, coupled with anticipated support from the European Central Bank’s aggressive rate cuts throughout 2025, could serve as a vital catalyst for economic stimulation amid a backdrop of gradually declining inflation,” the bank concluded.
Before shifting focus to 2025, traders today will be watching for a handful of American economic indicators. Key reports on consumer confidence from the Conference Board, durable goods orders, and new home sales are on the agenda.
However, it is expected that trading will be particularly subdued this week, as the Paris Stock Exchange will close early at 1:00 PM tomorrow and remain closed until Friday. With Christmas and New Year’s situated mid-week, trading volumes are likely to be considerably lower than in previous years due to many operators taking time off.
In the bond market, the 10-year U.S. Treasury yield is easing back towards 4.52%, following accommodating remarks from Austan Goolsbee, president of the Chicago Federal Reserve. He suggested that ‘neutral rates’ are considerably lower than current levels, implying that the Fed may need to implement significant rate cuts over the next 12 to 18 months.
This speculation about potential rate cuts has contributed to a 1.2% increase in the Dow Jones and a rise of just over 1% in the Nasdaq on Friday. On the forex front, as the year-end holidays approach, the euro remains stable against the dollar, hovering around 1.0440.
After experiencing a downturn last week, both benchmark oil contracts have seen slight increases, with North Sea Brent rising by 0.4% to $73.2 per barrel and U.S. light crude (WTI) climbing by 0.5% to around $69.8.