The Paris Stock Exchange is poised for a positive opening, with the CAC 40 futures rising by 50 points. However, a lack of significant market drivers may prompt investor caution as the market nears last week’s historical highs. Despite a favorable trend over the past three months, analysts warn of potential limitations in European stocks’ performance compared to the U.S. Amidst stable currency markets and declining oil prices, European bond markets face challenges, while macroeconomic data may influence future trends.
Positive Start for the Paris Stock Exchange
The Paris Stock Exchange is set to commence on a positive note this Tuesday morning. However, the absence of significant market catalysts may lead investors to adopt a cautious approach, especially as the market approaches its historical highs from last week.
As of 8:15 AM, the CAC 40 futures contract for March delivery has risen by 50 points, reaching 8180 points, suggesting a promising start to the week.
Market Trends and Economic Outlook
Despite the optimistic opening, limited fluctuations are anticipated due to a lack of major political or economic events, along with no new developments regarding trade tensions, which currently serve as the main source of market anxiety.
The economic calendar appears sparse in the upcoming days, with the latest consumer price index (CPI) data expected to be released on Wall Street this Wednesday, followed by producer price figures the following day.
Given the anticipated calmness of the week, the Paris market may leverage this opportunity to sustain its favorable trend that has been ongoing for three months. Since the start of the year, the CAC 40 has surged by 10%, coming within two points of its all-time high of 8259 points. In contrast, the S&P 500, which has faced three consecutive weeks of decline, is down nearly 2%.
While European stocks continue to outperform their U.S. counterparts, analysts advise caution regarding this trend. They note that this performance does not necessarily reflect a stronger European economy but rather a shift in sentiment regarding economic prospects on both sides of the Atlantic.
According to AXA IM, the fading appeal of the ‘Trump trade’ is influenced by increasing negative repercussions from the new U.S. administration’s policies, making certain traditional aspects of ‘old Europe’ more appealing.
Furthermore, analysts from J. Safra Sarasin express concerns about the sustainability of the recent rebound, despite maintaining a positive outlook on European stocks since December. They caution against increasing positions in European equities after a decade of significant outperformance.
However, there is still potential for European small caps to catch up, as they have not fully incorporated recent improvements in macroeconomic data. Lombard Odier also anticipates possible consolidation in the coming weeks, suggesting that French stocks may outperform in the short term as German stocks appear overbought.
Last week marked a challenging period for European bond markets, experiencing their worst performance since early October 1998. Although a technical rebound is emerging, it remains timid. With expectations of increased budget spending and debt across Germany, the yield on the 10-year Bund has decreased slightly but remains above 2.83%.
In the U.S., the yield on 10-year Treasuries has risen to 4.31% just days before the release of consumer price data. Currency markets are relatively stable, allowing the euro to maintain a comfortable position above the 1.08 threshold it surpassed last week.
Following a significant decline last week, oil prices continue to trend downwards, with North Sea Brent oil dipping 0.1% to $70.3, while U.S. light crude prices have fallen slightly below $67.