CAC40: gains over 1% as Wall Street buys cheaply

(CercleFinance.com) - With 90 minutes to go before the close, the CAC40 is now up +1.
2% at 7,440.

Last night, Tokyo quickly lost -3% (after -6% in 3 sessions), but the Nikkei recovered strongly and ended the day down just -0.5%.
The CAC 40 - which broke through the technical thresholds of 7,600, 7,500 and 7,400 points in turn last week - this morning posted a year-to-date loss of around 2.1%: we can breathe easier now.

Inflation figures from China are also reassuring, with the CPI at its lowest level (+0.6% year-on-year) for 4 years and a sequentially negative 'core' index.

Investors are now awaiting the latest US inflation data, which should be reassuring (energy prices continued to fall in August as Chinese purchases slowed), followed by the ECB's decision, which is expected to cut its key rate by 25 basis points on Thursday.
But the prospect of a marked slowdown in the US economy (confirmed by the latest mixed employment figures in the USA) is worrying, beyond the next rate cuts.

In New York, too, indices rebounded: the 3 main indices posted between +1 and +1.1% after suffering one of their worst weeks in almost a year, with weekly losses of almost 6% for the Nasdaq.
In terms of figures, US business inventories rebounded slightly in July (+0.2%) after remaining stable in June, according to data published on Monday by the Commerce Department: the economist consensus was for 0.3%, after remaining perfectly stable the previous month.

The statistics were mainly driven by a 1% rise in automobile inventories, while computer equipment inventories rose by 1.4%.

Business sales rose by 1.1% in July, meaning that at the current rate it will take 1.35 months to sell off inventories, compared with 1.38 months in July 2023.

In the coming days, market participants will be hoping for reassurance from the US inflation figures, followed by the ECB's speech.

Knowing that inflation in the eurozone recently fell to its lowest level since mid-2021, and is now back within the European Central Bank's target, Mario Centeno, Governor of the Bank of Portugal, recently judged that the decision to cut rates would be 'easy to take'.

Economists therefore expect the ECB to cut its deposit rate by 25 basis points on Thursday, from 3.75% to 3.50%, while at the same time revising downwards its outlook for inflation growth.

President Christine Lagarde is expected to stress at her press conference that the institution remains "data-dependent", meaning that it will continue to favor an "as and when" approach at its meetings.

The question investors will now be asking is whether the ECB will cut rates twice or three times this year.

While awaiting the ECB's verdict, investors will be able to study the monthly consumer price figures on Wednesday, in the hope that these will show lower-than-expected underlying inflation.

Consensus forecasts point to CPI inflation of 0.2% month-on-month in August, bringing the year-on-year rise to 2.6%.

The core CPI index, the one most closely followed by the Fed, is expected to hold steady at 3.2% year-on-year, as in July.

Traders are hoping that this data will enable them to settle the debate between the prospect of a 25 or 50 basis point rate cut by the Fed next week.

The week following the US jobs report is generally quiet on the markets, but these hesitations promise some further volatility until the Fed's announcements, scheduled for Wednesday September 18.

The mixed employment figures (published last Friday, editor's note) suggest, however, that the markets are looking for more rate cuts than the Fed is in a position to offer," points out Michael Brown, strategist at Pepperstone.
Yields, which had eased sharply last week, are recovering a little this Monday, with +2pts on the T-Bond 2034 at 3.725% and +1pt on the Bund at 2.181%, +1.2% on our OATs at 2.891%.

Another element likely to influence the trend is the first televised debate between Kamala Harris and Donald Trump in the run-up to the November 5 presidential election in the United States, to be held tomorrow evening.

If the gap in voting intentions has recently widened in favor of the Democratic candidate (according to the Democratic media, which is in the majority in the USA, the few 'conservative' media outlets produce the opposite figures), it is likely that many voters will rely on this debate to make their choice.

Caution: the 2016 scenario with Clinton's confident campaign could happen again", warn the analysts at DeftHedge, a specialist in decision support for foreign exchange and commodities risk.

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