The Paris stock exchange is set for muted moves on Friday, as investors adopt a wait-and-see approach ahead of key U.S. inflation figures that could prompt a reassessment of interest rate cut expectations in the coming months.
As of 8:05 am, the December "future" contract is up 40.5 points at 8,170, pointing to a directionless start to the day, mirroring the limited movements seen since the beginning of the week.
On Thursday, the Paris market ended the session with a modest 0.4% gain at 8,122 points, bringing it within about 2% of its all-time high of 8,314.2 points, set on November 13.
However, the week's provisional balance remains flat for now, meaning the release of the PCE inflation data at 2:30 pm--the main statistic the Federal Reserve relies on to track price dynamics--will be crucial in determining the CAC 40's weekly performance.
Recent indicators confirming a slowdown in the U.S. labor market have strengthened expectations for another Federal Reserve rate cut in December. Still, caution prevails given the persistence of core inflation in recent months.
Consensus forecasts call for a 2.9% year-on-year rise in the core PCE index (excluding food and energy) for September, matching the increase recorded in August.
A surprise in the data could lead markets to revise their expectations for the Fed's rate trajectory through 2026, as investors currently anticipate two rate cuts next year in addition to the one widely expected next week.
Traders in the "futures" market now see an 87% probability of another rate cut following the December 9-10 meeting, up from 68% a month ago, according to the CME Group's FedWatch barometer.
"We're already in December, but due to the recent federal government shutdown, these figures will only provide a snapshot for September," Danske Bank analysts cautioned this morning. "It's important to keep this in mind when analyzing the data," the Danish bank added.
Investors will also closely watch the University of Michigan's consumer sentiment index, due at 4:00 pm, which will be the first survey of household confidence since the end of the shutdown, suggesting a possible improvement over the previous month.
On Thursday night, the New York Stock Exchange closed mixed, with caution limiting bold moves ahead of the inflation data release.
At the closing bell, the Dow Jones slipped 0.1%, while the S&P 500 and Nasdaq Composite edged up 0.1% and 0.2%, respectively.
Futures on New York indices currently point to a slightly higher Wall Street open, in the range of 0.1% to 0.3%, though the trend could shift following the PCE release.
While awaiting U.S. data, the European morning will be marked by the publication of final third-quarter eurozone GDP figures, which are expected to confirm quarterly growth at 0.2%, supported by improved consumption in Italy and Spain and strong French exports, among other factors.
German industrial orders, forecast to rise by 0.5% in October, will also influence trading.
In the bond market, U.S. Treasuries are not benefiting from rate cut expectations, with the 10-year yield climbing above 4.10% compared to around 4.05% the previous day.
The euro is little changed, but is holding around $1.1665, above its 50-day moving average of roughly $1.1650, though still well below the resistance at $1.1730.
After their recent rebound, oil prices are flat, caught between geopolitical uncertainties and expectations of Fed rate cuts on one hand, and the prospect of continued oversupply in the medium term on the other. Brent remains near the $63 mark, while U.S. light crude (West Texas Intermediate, WTI) is approaching $60.
Gold remains well supported by the prospect of Fed rate cuts. The precious metal is up 0.3% at 4,257.3 points, but still far from its late October peak above $4,350.
While the market remains cautious ahead of new economic indicators, downside risks are seen as limited, according to specialists, due to central bank purchases of precious metals, a weak dollar, economic uncertainties, and ongoing geopolitical tensions.
