CAC Rises on Sharp US Employment Data, Nonfarm Payrolls Next

The French stock market has posted slight gains in the Friday session, and the CAC index has risen 0.86 percent. Currently, the CAC is trading at 5,364.50, close to the high for the month of May. On the economic front, there are no eurozone or French events on the schedule. In the US, employment reports are in the spotlight, with three key indicators – Nonfarm Payrolls, wage growth and the unemployment rate. The markets are braced for a soft May release of 181 thousand, compared to 253 thousand a month earlier.

The CAC has gained ground on Friday, as global stock markets were boosted by an unexpectedly strong US ADP Nonfarm Payrolls report on Thursday. The ADP release jumped to 253 thousand, crushing the forecast of 181 thousand. Will the government nonfarm payrolls report also beat expectations? The ADP release is often a good indicator of what to expect from nonfarm payrolls, and if NFP also jumps higher, the CAC should continue to move higher. The markets are keeping a close eye on the French legislative elections, with the first round slated for June 11. French President Emmanuel Macron’s LREM party is on track to win the first round, with the latest polls giving Macron’s party 31 percent of the vote, well ahead of the conservative Republicans, who are at just 22 percent. If Macron can translate this lead into a strong showing in the second round, the LREM could form a majority in parliament,which would mark a major victory for Macron.

The Federal Reserve has said that a rate increase is coming “soon”, but the May rate statement was more dovish than the markets expected. With less than two weeks to go before the Fed’s policy meeting on June 14, the markets are ever-more confident that rates will move higher for the second time this year. The odds of a quarter-point rate hike continue to rise, and according to the CME Group, currently stand at 91 percent. Low levels of inflation have become a head-scratcher for Fed policy makers, as inflation remains stubbornly low despite a red-hot labor market. As for additional rate hikes in the second half of 2017, the markets are much more skeptical, as the heady predictions that the Fed could raise rates up to four times this year have faded considerably. Currently, a September rate increase is priced in at just 27 percent.

Economic Events

Friday (June 2)

• 8:30 US Nonfarm Employment Change. Estimate 181K

*All release times are EDT

*Key events are in bold

CAC, Friday, June 2 at 8:20 EDT

Open: 5347.90 High: 5373.00 Low: 5341.60 Close: 5362.10

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