CAC Unchanged as Geopolitical Tensions Weigh on Stock Markets

The CAC 40 is showing little movement on Wednesday, as the index is trading at 5,115.00. On the release front, there are no Eurozone or US events on the schedule. President Donald Trump will conduct an interview with the Fox Business Network, and will discuss health care, tax reform, and the crises in Syria and North Korea. On Thursday, France will publish Final CPI, with the markets forecasting a strong gain of 0.6 percent.

The CAC has enjoyed a strong run in the first quarter of 2017, gaining 4.7 percent. European stock markets have benefited from the eurozone economy, which has recorded higher growth and inflation levels. With economic conditions improving, investor confidence levels have followed suit and posted strong numbers in Q1. Eurozone Sentix Investor Confidence climbed to 23.9 points in April, pointing to strong optimism among investors and analysts. German ZEW Economic Sentiment, which surveys the mood of German investors, sparkled in April, jumping to 19.5 points, well above the forecast of 13.2 points. This marked the strongest reading since August 2015.

France goes to the polls on April 23, in the first round of the presidential election. The current frontrunners are centrist Emmanuel Macron and far-right leader Marine Le Pen, but the race remains tight and unpredictable, and could have a strong impact on the French stock market. Le Pen has been an outspoken critic of eurozone and wants to hold a referendum on France’s membership in the EU. She is expected to advance to the second round, and Le Pen’s success could dampen confidence in the euro and the stock market.

European stock markets are steady on Wednesday, as investors remain cautious about geopolitical tensions, particularly in Syria and North Korea. The US bombed a Syrian military base last week, in response to a chemical attack by Syrian warplanes. Russia has strongly condemned the US move, chilling relations even further between the US and Russia. President Trump has also sent warships to the Korea peninsula, in a show of strength against North Korea, which continues to test ballistic missiles in defiance of the international community. If tensions escalate on either of these fronts, stock markets could lose ground.

On Monday, Federal Reserve Chair Janet Yellen provided insights into the Fed mindset. She said that with the economy close to full employment and 2 percent inflation, Fed policymakers were looking to reduce the support that the central bank was providing the economy. The minutes of the March meeting indicated that the Fed plans to trim the $4.5 trillion balance sheet, which has ballooned as a result of the huge asset-purchase program which started in 2008. The Fed plans to raise rates twice more in 2017, with the next rate expected in June. Yellen emphasized that the Fed’s policy stance is neutral, as interest rate increases will be gradual, given that the economy is growing at a moderate pace.

Economic Calendar

Wednesday (April 12)

  • 10:00 US President Trump Speech

Thursday (April 13)

  • 6:00 German Final CPI. Estimate 0.2%
  • 6:45 French Final CPI. Estimate 0.6%

*All release times are EST

*Key events are in bold

CAC, Wednesday, April 12 at 9:40 EST

Open: 5114.00 High: 5143.50 Low: 5140.50 Close: 5115.00

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.