Following two days of losses, the Paris Stock Exchange is poised for a potential recovery amid cautious trading, influenced by upcoming U.S. inflation data. Futures for the CAC 40 indicate a positive opening. Meanwhile, U.S. markets closed mixed, with concerns over inflation impacting investor confidence ahead of significant economic indicators. Rising bond yields and fluctuating oil prices further reflect market tensions, as geopolitical factors and sanctions shape supply dynamics.
Paris Stock Exchange Set for a Potential Bounce
After enduring two consecutive days of losses, the Paris Stock Exchange is gearing up for a possible rebound on Tuesday morning during early trading. However, the upcoming release of monthly inflation data from the U.S. is likely to instill some caution among investors, potentially tempering risk appetite.
As of 8:15 AM, the futures contract on the CAC 40 index, set to expire at the end of January, was positioned at 7475.5 points, reflecting a rise of 63.5 points, which points to a positive opening for the market.
The Paris market had wrapped up the first trading session of the week with a modest decline of 0.3%, settling at 7408 points, after experiencing a drop of up to 1% earlier in the morning.
Wall Street’s Mixed Performance and Economic Insights
On Wall Street, U.S. stock markets concluded the day on Monday with mixed results. The major indices in New York displayed limited movements, with the Dow Jones rising by 0.9%, the S&P 500 gaining 0.2%, while the Nasdaq experienced a decline of 0.4%.
Analysts from Danske Bank commented, “This scenario exemplifies how negative reactions to employment data tend to be short-lived.” They further emphasize that the recently published strong economic indicators from the U.S. bode well for stock markets, despite their recent lackluster performance.
Investor caution is anticipated today as many are hesitant to take on significant risks ahead of tomorrow’s consumer price index (CPI) release, which may offer insights into the Federal Reserve’s interest rate trajectory. Additionally, Thursday’s retail sales figures for December are expected to provide further clarity on the economic landscape across the Atlantic.
Michael Brown, a strategist at Pepperstone, warned that if year-on-year core inflation exceeds the anticipated 3.3%, coupled with retail sales growth falling below the expected 0.6%, this could solidify expectations for a slowdown in Federal Reserve rate cuts. Such a scenario would likely bolster the dollar and push the yield on ten-year Treasuries above the 4.80% threshold.
The release of producer price figures in the U.S. today at 2:30 PM will offer investors a preliminary glimpse of what to expect from tomorrow’s CPI data. Analysts are cautious about significant market positioning ahead of Donald Trump’s inauguration as the 47th president of the U.S. next Monday.
This caution is further amplified by Trump’s ambiguous statements regarding the scope of tariffs he plans to implement once in office. In the bond market, U.S. long-term rates continue to rise, with the yield on ten-year T-Bonds surpassing 4.80%, marking the highest level since October 2023.
These rate tensions are affecting global bonds, as evidenced by the yield on ten-year Bunds climbing above 2.68% and the yield on French OATs increasing by 3.5 points to approximately 3.46%, resulting in the France/Germany spread widening to over 87.5 basis points.
On the currency front, the euro has managed to rise above 1.0250 against the dollar, stabilizing around 1.0260. Oil prices are experiencing slight consolidation following a recent upward trend, which saw U.S. light crude (WTI) surpass the $80 mark for the first time since August.
Amid new sanctions imposed by Washington on the Russian energy sector, investors are speculating that countries like India and China will have to seek alternative supply sources. Currently, WTI is down 0.6% to $78.4, while North Sea Brent has also dipped by 0.6% to $80.5.