CAC 40: hard landing or smooth transition?

( – The Paris Stock Exchange is signaled in wait-and-see mode on Tuesday morning, in a market context which remains favorable to risky assets even if caution seems to be in order before a series of indicators.

Around 8:15 am, the ‘future’ contract on the CAC 40 index – August delivery – rose by 17.5 points to 6588.5 points, announcing a continuation of the summer ‘rally’ in the immediate future.

Investors are counting on the series of economic statistics that will be released in the coming days to allow the markets to extend the rise of recent weeks.

The CAC 40 index has recovered more than 13% since its trough on July 5, buoyed by better-than-expected corporate results and signs of slowing inflation, at least in the United States.

Now that the earnings season is coming to an end, all that remains is the indicators to help market participants assess the health of the economy and determine the evolution of the monetary policy of the major central banks.

Against a background of growing concern about the strength of global growth, they necessarily hope that the next indicators expected in Europe and the United States will reflect good resilience in activity.

‘The risk of a recession continues to weigh on the markets while bond yields and commodity prices are falling’, analysts at Danske Bank worried this morning.

‘Central banks, with the exception of the People’s Bank of China, remain committed to bringing inflation under control, at a time when more and more indicators point to a risk of recession’, they add.

“A growing number of analysts predict a hard landing for the US economy, rather than a smooth transition, and the risk of stagflation is growing in Europe,” warns the Danish bank.

At Deutsche Bank, we recall that ‘hard landings have, from a historical point of view, been the norm in a situation as unfavorable as the one we are currently going through’.

The ZEW index – which measures the morale of investors in Germany – should have deteriorated further in August due to the surge in electricity prices, which is not helping the business of German companies.

Unemployment and wage figures in Britain are also eagerly awaited, as the country seems to be the first of the major Western groups on the verge of tipping into recession.

The figures for housing construction and industrial production in the United States will also be closely watched to find out if the world’s largest economy continues to hold up well.

On the other hand, good activity indicators could dampen the enthusiasm of investors, lest they encourage the Federal Reserve to multiply its rate hikes.

Oil prices will also remain a determinant of the stock market trend, the tumble of US light crude having largely hampered the progress of Wall Street yesterday.

On the corporate front, US retail giants Walmart and Home Depot will release their quarterly accounts at midday.

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