It’s been a quiet week for European stock markets, and the CAC is flat in the Wednesday session. Currently, the index is trading at 5,290.35. On the release front, Eurozone Preliminary Flash GDP remained unchanged in the first quarter at 0.5%, matching the forecast. In the US, the Federal Reserve is expected to maintain interest rates at 0.75%. On Thursday, France and the Eurozone release Services PMIs, followed by Eurozone Retail Sales.
All eyes will be on the Federal Reserve, which releases its policy statement later on Wednesday. A rate hike is extremely unlikely, with the CME Group pricing in a hike at just 5%. This means that the markets will be focusing on the rate statement and the views of policymakers concerning economic conditions. The Fed has two key goals which have been achieved, namely full employment and an inflation rate of 2%. One area of concern is the balance sheet, which stands at $4.5 trillion. The minutes of the March meeting stated that policymakers want to start reducing this figure before the end of 2017, so the markets will be looking for another reference to the balance sheet in the rate statement or the minutes of the meeting. The markets are fairly confident that the Fed will press the rate trigger in June, as the odds for a hike have improved to 63%. If the rate statement is more hawkish than expected, we could see these odds increase.
The eurozone has been hampered by years of high unemployment, but the labor situation has improved considerably. The eurozone economy continues to expand, and more growth has meant more jobs and lower unemployment figures. Just a year ago, the eurozone unemployment rate was at 10.3%, but the rate has been steadily decreasing since then. The March release remained unchanged at 9.5%, within expectations. Germany has led the way for Europe, with improving employment data. US employment numbers will also be in the spotlight this week, with wage growth and the official nonfarm payrolls report being released on Friday. If these indicators are not close to the estimates, we’re likely to see some movement from the CAC.
French voters will head back to the ballot box on Sunday, with Emmanuel Macron and Marine Le Pen vying for the next president of France. European stock markets have been very steady in the second round of the campaign, as opinion polls continue to show a comfortable majority for Macron:
The polling average line looks at the five most recent national polls and takes the median value, ie, the value between the two figures that are higher and two figures that are lower.
Source – BBC
French Election Timeline
May 3 – TV debate between the two remaining candidates
May 5 – [from midnight] Poll blackout
May 7 – Second round of French presidential elections. Last polls close at 19:00 BST / 14:00 EDT, with an exit poll result announced immediately.
May 11 – Official proclamation of the new President.
May 14 – [from midnight] End of Francois Hollande’s mandate
June 11 – First round of legislative elections
June 18 – Second round of legislative elections.
Wednesday (May 3)
- 5:00 Eurozone Preliminary Flash GDP. Estimate 0.5%. Actual 0.5%
- 5:00 Eurozone PPI. Estimate +0.1%. Actual -0.3%
- 14:00 US FOMC Statement
- 14:00 US Federal Funds Rate. <1.00%
Thursday (May 4)
- 3:50 French Final Services PMI. Estimate 57.7
- 4:00 Eurozone Final Services PMI. Estimate 56.3
- 5:00 Eurozone Retail Sales. Estimate 0.1%
- 12:30 ECB President Mario Draghi Speech
- Tentative – French 10-y Bond Auction
*All release times are EST
*Key events are in bold
CAC, Wednesday, May 3 at 7:40 EST
Open: 5282.40 High: 5294.50 Low: 5275.00 Close: 5283.00
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