The Paris Bourse is holding steady on Friday, as it awaits inflation data from Europe and the United States, which are likely to influence the monetary policies of central banks. European and U.S. indices are showing varied dynamics, with particular attention being paid to upcoming economic publications.
The Paris Bourse showed little movement this Friday morning, as it awaited inflation data from Europe and the United States.
The CAC 40 was virtually stable at the opening, hovering around 7,983.2 points (+0.06%). Dassault Systèmes and Capgemini were the biggest decliners on the index, influenced by Salesforce’s poor performance and advisory revisions from JPMorgan and Jefferies for Capgemini.
However, it was down to 7,973.06 (-0.068%) by 2pm. On Thursday, the CAC 40 index closed up by 0.55%, rebounding from a series of sharp declines. Over the week, it was down 1.47%, while the balance sheet for May remained stable at -0.12%.
Falling inflation in the eurozone
Friday’s session was dominated by the publication of May’s inflation figures for the eurozone. The CPI rose to 2.6% year-on-year, above expectations.
In France, the harmonized consumer price index, which serves as the benchmark for calculating inflation in the eurozone, reached 2.7% in May 2024 year-on-year, after 2.4% in April, slightly exceeding analysts’ forecasts. Inflation in Germany and Spain was also slightly higher than forecast.
“We still think the trend for eurozone inflation is downwards, but it is likely to be slower than expected,” said Sebastian Paris-Horvitz of LBP AM. As a result, the ECB’s rate cuts are expected to moderate after the first cut next week.
Meanwhile, France’s gross domestic product (GDP) growth was confirmed at +0.2% in the first quarter of 2024, mainly supported by foreign trade. However, household consumption fell sharply in April, down 0.8% on March.
For its part, salaried employment in France rose in the first quarter of 2024 by 0.3% (or +75,100 jobs) after remaining stable in the fourth quarter of 2023 (+8,900 jobs), according to Insee. It is 0.7% above its level of a year ago (+185,700 jobs) and 5.2% above its pre-Health Crisis level at the end of 2019, representing almost 1.4 million additional jobs.
On the bond market, the interest rate on the French ten-year government bond remained stable at 3.15% compared with Thursday.
The United States on hold
US markets closed in the red on Thursday. The Dow Jones slipped 0.86% to 3,8111 points, while the Nasdaq fell 1.08% to 1,767 points, weighed down by disappointing forecasts from Salesforce.
On the same day, the US Commerce Department announced a downward revision of the country’s economic growth for the first quarter. The annual growth rate was corrected to 1.3%, compared with the previous estimate of 1.6%, mainly due to lower consumer spending. The revision stems from recent declines in retail sales and equipment spending, which have tempered expectations of an interest rate cut by the Federal Reserve.
“It’s certainly something the Fed was expecting. All these lower-than-expected numbers (…) have the effect of easing the pressure on the Fed,” said Helen Given, forex trader at Monex USA.
Attention now turns to the release of the US PCE price index scheduled for 2.30pm. This index could influence the Federal Reserve’s rhetoric and its forecasts for inflation and growth.
A status quo is expected for the Fed meeting on June 11 and 12, but some members, including Neel Kashkari, remain open to further rate hikes in the event of a rebound in inflation.
Trump condemned
Market operators seem little affected by Donald Trump’s conviction for falsifying accounting documents in the Stormy Daniels affair. The former US president is accused of making up accounting documents to conceal payments to the former pornographic actress to buy her silence before the 2016 election. His sentence, which he will probably appeal, will be handed down on July 11.
However, neither this verdict nor a possible prison sentence will prevent the Republican from running or being elected in the November 5 presidential race against Joe Biden.
“I don’t know if this necessarily has an effect on the markets, which had already factored in the possibility of a conviction. This case is secondary. I think if he had been found not guilty, it would have had more impact,” comments Jamie Cox at Harris Financial. “Markets have been down all week for other reasons, including inflation. That’s what’s worrying the markets, not the spectacle of a former president’s trial”.
A brighter outlook for Japan?
The Tokyo Stock Exchange closed higher on Friday, encouraged by lower US bond yields, while Hong Kong advanced on hopes of support measures following the contraction of manufacturing activity in China.
The Nikkei index rose by 1.14% to 38,487.90 points, although it was down 0.4% on the week, and the Topix index gained 1.7% to 2,772.49 points.
The Japanese Ministry of Finance is due to announce the amount of its intervention in the foreign exchange market to support the yen, which could influence the value of the Japanese currency.
In Hong Kong, the Hang Seng index rose by 0.2% following the announcement of a contraction in manufacturing activity in China, fuelling hopes of government support measures.
The dollar rose against the yen, trading at 156.94 yen, and the euro fell to 169.79 yen.
On the oil market, US WTI fell slightly to $77.76 a barrel, while North Sea Brent remained stable at $81.86.
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