The Paris stock exchange recorded its twelfth consecutive session of muted volatility on Wednesday, slipping 0.45% to around 8,015 points. Technically, the situation is taking a turn for the worse as the CAC40 index has now broken below the lower boundary of its 8,050/8,150 trading corridor.
However, this move should be put into perspective, as there is not yet any clear bearish signal for the Euro-Stoxx50, which dipped 0.25% to 5,700 points, nor for the DAX or the BEL-20, which fell 0.35% to drop back below the 5,000-point mark.
On Wall Street, markets continue to tread water: the Nasdaq lost 0.6%, the S&P 500 closed flat at 6,840, and the Dow Jones gained 0.4% after losing 0.5% the previous day. The S&P 500 has been stuck in a narrow range between 6,800 and 6,880 since November 26, marking 15 days of complete stagnation--paralyzed by uncertainty over the message the U.S. Federal Reserve is set to deliver.
According to analysts, this extended pause does not necessarily signal the exhaustion of the bullish momentum that has driven markets higher--led by technology, consumer stocks, and semiconductors--but rather reflects logical profit-taking after a rapid ascent that pushed Wall Street to record highs this autumn.
"Market conditions are never very lively on the eve of a FOMC meeting," notes Michael Brown, strategist at Pepperstone. "Those preceding the December meeting, as everyone starts preparing for the year-end holidays, are even less so," he adds.
While a third Fed rate cut in three months is widely expected, the key question is whether the central bank will signal a continuation of its monetary easing cycle into early 2026.
The Federal Reserve's statement, due at 8:00 p.m., will be accompanied by its latest economic projections and followed by a press conference from its chairman, Jerome Powell.
Given the persistent divergence of views within the Fed's leadership in recent months, investors are bracing for a "restrictive" rate cut--one motivated more by caution in light of recent labor market deterioration than by a need to support U.S. growth, which remains robust.
Many observers expect Powell to temper expectations for further rapid rate cuts in the coming year, following the three consecutive reductions since September.
While tonight's expected rate cut could be the last for some time, it is likely that Powell will avoid derailing financial markets, opting for language that is sufficiently delicate and reassuring to maintain investor confidence after a particularly fruitful year for equities.
"If the Fed sends a more dovish signal than anticipated, the market could quickly regain momentum and retest its historic highs," notes Linh Tran, market analyst at XS.com. "Conversely, if Powell's tone is overly cautious, the S&P 500 risks continuing its gentle consolidation as it awaits new catalysts," she warns.
One telling indicator: bond markets have deteriorated--sometimes sharply--since late November. No rally has lasted more than a few hours, with the yield on 10-year T-Bonds hitting 4.51% this morning before retreating to 4.17% (-2 basis points), while the 2-year yield now hovers between 3.625% and 3.605% (-0.8 basis points).
In Europe, French OATs are weakening by 1.1 points to 3.5780%, German Bunds by 1 point to 2.8620%, and Italian BTPs by 1.2 points to 3.565%.
The euro edged up 0.15% to 1.1645, while Bitcoin slipped 1% to $91,900.
On the energy front, oil prices continued to slide, with Brent down 1.1% to $61.4 and WTI falling 1.2% to $57.65 on the NYMEX.
