Paris Stock Exchange is expected to open slightly lower as investors remain cautious ahead of the European Central Bank’s monetary policy meeting. The CAC 40 index has seen a recent uptick, ending Friday at 7427 points, with a weekly gain of 2.7%. However, analysts express skepticism about a strong year-end performance, highlighting a shift towards U.S. assets and concerns over interest rate decisions. Oil prices have increased due to geopolitical tensions, with Brent crude rising to $71.5 per barrel.
Paris Stock Exchange Anticipates a Cautious Start
The Paris Stock Exchange is set to open slightly lower on Monday morning as investors approach the week with caution, particularly in light of the upcoming monetary policy committee meeting of the European Central Bank (ECB) scheduled for Thursday.
As of 8:15 AM, the December futures contract for the CAC 40 index has declined by 11.5 points, settling at 7426.5 points. This indicates a small consolidation following the recent uptick of the index.
Market Performance and Future Outlook
Despite the deepening political crisis in France triggered by the collapse of the Barnier government, the Paris market managed to record a 1.3% increase, finishing Friday’s session at 7427 points. The CAC 40 achieved a noteworthy weekly gain of 2.7% after five consecutive days of rising stocks, effectively breaking a six-week streak of declines.
Investment strategy advisor Christopher Dembik from Pictet AM noted, “As anticipated, the market did not experience any dramatic shifts following the censure.” He elaborated that the market has already factored in the unlikely scenario of a debt crisis in France.
While the Paris market has shown signs of recovery, professional analysts remain skeptical about a robust year-end performance. Dembik raised the question of whether the CAC 40 could experience a traditional Christmas rally, suggesting it may be challenging.
He pointed out that investors now prefer U.S. assets over French ones in search of higher yields, which has resulted in capital outflows from France to the United States. “This trend is likely to intensify,” Dembik cautioned, predicting that the CAC 40 might close below the significant 7000-point mark, reflecting an approximate 7% decline for the year.
In contrast, the S&P 500 has surged over 27% since the beginning of the year. Concerns regarding the ECB’s potential decision to implement a modest 25 basis point cut in interest rates—rather than a more substantial 50-point reduction—could also impact market trends and hinder the possibility of a Christmas rally.
François Rimeu, senior strategist at Crédit Mutuel AM, remarked, “Rapid rate cuts would be more appropriate for the current European situation, but the declining euro seems to worry central bankers.” Historically, stock markets tend to see gains in the final weeks of the year due to factors such as window dressing, with U.S. averages typically rising over 2% during this period. The S&P index has already gained 1% since the start of the month.
Besides monetary policy developments, investors are bracing for the consumer price index report from the United States, set to be released on Wednesday. This data will be scrutinized closely as it comes just one week before the final Federal Reserve meeting of the year. Consensus estimates indicate that U.S. inflation is expected to have increased by 0.3% month-on-month in November, following a 0.2% rise in October.
In the energy sector, oil prices have risen again on Monday, boosted by the resurgence of geopolitical tensions and unrest in Syria following the fall of President Bashar Al-Assad. Brent crude has increased by 0.6% to $71.5 per barrel, while the January contract for light American crude (WTI) has also risen by 0.6%, now priced at $67.6 per barrel.