CAC 40: cautious optimism ahead of US inflation data

(CercleFinance.com) - The Paris Bourse is expected to open cautiously on Wednesday, awaiting the latest US inflation figures, which could well determine the day's trend.


At around 8:15 a.m., the February futures contract on the CAC 40 index was up ten points at 8,046.5, suggesting a continuation of the upward trend seen since the start of the week.

Buoyed by technical buybacks and hopes of an imminent resumption of growth in Europe, the Paris market has posted solid performances so far this year.

With a gain of more than 8% since January 1, the CAC is well ahead of the S&P 500, the benchmark index for American fund managers, which has gained just 3% in the meantime.

Meanwhile, the STOXX Europe 600 index has been racking up all-time highs for the past month, as has the German DAX, which has already gained more than 10% this year.

The U.S. consumer price index (CPI) for January, due at 2.30pm, will nonetheless be carefully studied against a backdrop of fears of persistent U.S. inflation, likely to lead the Fed to ease its monetary policy.

According to the consensus, the average of economists' estimates points to an annualized figure of 2.9%, the same as in December, while the core CPI inflation index is expected to come in at 3.1%, marking a slight slowdown on the previous month (+3.2%).

This report will not yet be affected by the implementation of customs surcharges, but subsequent ones could be if Donald Trump's recent protectionist measures against Canada and Mexico were to be maintained.

These two countries supply 44% of US food imports (to the tune of $85 billion), and food accounts for 13.5% of CPI", point out Oddo BHF analysts.

Given the new American president's interventionism on the trade front and its potentially inflationary effects, the evolution of monetary policy continues to worry investors, who no longer expect the next rate cut before July.

This means that the Federal Reserve would skip its turn at its March, May and June meetings, an approach confirmed yesterday by Chairman Jerome Powell, for whom there is no urgency to cut rates.

It's hard to imagine that the CPI figures will tip the balance one way or the other, given that FOMC members are not only waiting to see further progress on disinflation, but also prefer to be patient while they assess the economic impact of Trump's trade policy", comments Michael Brown, strategist at Pepperstone.

During his hearing before the Senate Banking Committee, the Fed boss noted that inflation had "significantly" eased over the past two years, but also admitted that it remained at relatively high levels.

"Knowing that our approach today is less restrictive than before, and that economic activity remains solid, we don't need to rush to adjust our policy", he declared.

Jerome Powell is due to continue his hearings before US lawmakers today, but this time before the House Financial Services Committee.

After yesterday's small fluctuations on Wall Street, futures on the major New York indices are currently pointing to a stable or even slightly lower opening on Wall Street, but consumer price statistics (CPI) could change the picture.

The latest consumer price figures are also likely to cause a reaction in the dollar, as are US bond yields.

The 10-year Treasuries rate rose by four basis points yesterday above 4.53% in the wake of Powell's testimony in Washington.

For its part, the euro is trying to stabilize against the dollar, not far from 1.0360 against the greenback, after three consecutive sessions of decline.

On the oil market, crude oil prices regained some ground after the technical rebound that began at the end of last week. Brent consolidated by 0.4% to $76.7, as did WTI, which returned to $73.

Gold continued to suffer from profit-taking after its series of absolute highs in recent sessions, shedding 0.6% to $2,915.3 an ounce after briefly breaching the $2,900 mark yesterday.

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