The Paris Stock Exchange is facing ongoing challenges as the CAC 40 index futures decline amid political uncertainty in France and a bleak economic outlook for Europe. Prime Minister Michel Barnier’s Social Security funding bill may provoke a censure motion, increasing market vigilance. While the OAT/Bund spread improved following S&P’s rating affirmation, upcoming U.S. employment data could impact Federal Reserve policies, with economists expecting significant job growth amid rising unemployment rates.
Paris Stock Exchange Faces Challenges Ahead
Following a streak of six weeks marked by declines, the Paris Stock Exchange is set to encounter further obstacles on Monday, continuing to be affected by various headwinds that have driven its downturn over the past few months.
As of 8:15 AM, the CAC 40 index futures for December delivery dropped by 100.5 points, landing at 7142.5 points. This indicates a decrease of over 1% as the week kicks off.
Political and Economic Uncertainty Weighs on Markets
The ongoing political uncertainty in France, coupled with a bleak economic outlook for Europe, has hindered the CAC 40 from mirroring the upward momentum seen on Wall Street since the summer months.
French Prime Minister Michel Barnier is poised to face a significant challenge on Monday with the introduction of his Social Security funding bill, which may trigger a motion of censure from the National Rally.
Sylvain Bersinger, chief economist at Asterès, cautions that while the situation is not critical yet, financial markets are vigilantly observing the developments in French politics. He notes that the lack of a budget and a potential government collapse could introduce uncertainty and likely lead to an increased deficit in 2025 compared to current estimates, which would result in rising rates.
On a positive note, the OAT/Bund spread tightened from 88 to 82 points on Friday, following S&P’s decision to uphold the rating of French debt.
As the markets gear up for a bustling week post-Thanksgiving, a series of economic indicators are set to be released, culminating in the U.S. employment figures that could significantly influence the Federal Reserve’s monetary policy.
December often proves to be a favorable month for stock markets, traditionally seeing the S&P 500 gain an average of 2% as the year draws to a close.
Wall Street achieved a new series of records during the shortened ‘Black Friday’ session, yet caution may prevail as the employment report approaches, with the S&P already up over 26% year-to-date.
Economists predict around 200,000 new jobs created in November, a notable increase from the initial estimate of 12,000 for October, with an unemployment rate expected to rise slightly to 4.2% from 4.1%.
This key statistic, closely monitored by the Fed, will assist in determining the timeline for potential rate cuts. Currently, investors are pricing in a 67% likelihood of a 25 basis point reduction on December 18, according to CME’s FedWatch tool.
In this context, stronger-than-expected figures might be met with caution by investors concerned about the central bank potentially winding down its economic support measures.
In the lead-up to Friday’s employment data, the week will also feature the ADP report on private sector job creation on Wednesday, followed by weekly unemployment claims on Thursday.
Additional indicators scheduled for release this week include the ISM purchasing managers’ indices, particularly the one reflecting manufacturing sector activity, which is set to be announced this afternoon.
The week’s statistics will provide further insights into the health of the European economy, including the anticipated manufacturing PMI indices to be released in the morning.