Calm trends are evident on the Paris Stock Exchange as the Christmas holidays approach, with the CAC40 index stabilizing around 7270 points. Investor sentiment remains subdued, influenced by ongoing political uncertainties, and the index has dropped 3.5% this year. Analysts predict a consolidation phase, although Saxo Bank notes potential support from global market dynamics. Trading activity is expected to diminish further this week, with early market closures. In the bond market, the U.S. 10-year rate is retreating amid expectations of future rate cuts.
Calm Trends on the Paris Stock Exchange Ahead of the Holidays
The Paris Stock Exchange is exhibiting a notably tranquil trend this Monday, as we embark on a week shortened by the upcoming Christmas festivities. The CAC40 index is hovering around the 7270 points mark, reflecting a state of equilibrium.
Meanwhile, the New York Stock Exchange is anticipated to experience similar stagnation at the beginning of this festive week, as investors continue to process several key updates emerging from Washington. Futures for the major New York indices are showing stability, albeit with slight declines, hinting at an uncertain start to the trading session.
Year-End Performance and Market Outlook
Although stock markets typically enjoy a rise during the final weeks of the year, current investor sentiment suggests that expectations are subdued this time. The CAC 40 has underperformed significantly, down 3.5% for the year, positioning it among the lower performers in Europe for 2024.
This decline is set against a backdrop of ongoing political uncertainty, which has deterred investors from engaging with French stocks over the past six months. As the holiday season tends to bring about a quieter trading atmosphere, it seems unlikely that the Paris market will recover lost ground by December 31, especially given the recent downward trend where the CAC 40 fell by 1.8% last week, breaching the 7400 and 7300 point thresholds.
Analysts are now predicting a consolidation phase before any potential rebound. Notably, Saxo Bank recently highlighted some positive signals for the Paris index, noting that it has maintained critical support at 7100 points and could benefit from global market dynamics.
Factors such as substantial stimulus measures from China and a shift towards a more accommodating monetary policy are expected to provide significant support to markets. Furthermore, a declining euro might bolster European exports, helping to mitigate the effects of tariffs introduced by the previous U.S. administration.
Saxo also pointed out that stock valuations in Europe remain more appealing compared to those in the United States, where they have hit record highs. This relative attractiveness, combined with anticipated support from the European Central Bank’s aggressive rate cuts planned for 2025, could serve as a crucial catalyst for economic stimulation in a gradually easing inflation environment.
While political risks continue to shape current valuations, there exists considerable upside potential contingent on improved profit dynamics, clearer political scenarios, and a more favorable economic backdrop.
As market participants prepare to shift their focus to 2025, they will be monitoring a limited set of American economic indicators today, including the consumer confidence index from the Conference Board and new home sales. Additionally, durable goods orders are set to be released, with prior data indicating a decrease of 1.1% in November after a 0.8% increase in October.
This week is expected to be particularly subdued in trading activity, as the Paris Stock Exchange will close early at 1:00 PM tomorrow, with no reopening until Friday. The proximity of Christmas and New Year’s in the middle of the week is likely to result in lower trading volumes due to many operators taking a break.
In the bond market, the 10-year U.S. rate is seeing a retreat towards 4.52% following accommodating comments from Austan Goolsbee, president of the Federal Reserve Bank of Chicago, who indicated that ‘neutral rates’ are significantly below current levels, suggesting the need for substantial key rate cuts over the next 12 to 18 months.
This outlook has sparked speculation about three potential rate cuts next year, contributing to a 1.2% gain in the Dow Jones and a rise of just over 1% for the Nasdaq on Friday.
On the foreign exchange market, which is largely quiet as the year-end holidays approach, the euro remains stable against the dollar, trading around 1.0410.