CAC Posts Strong Gains as Oil and Bank Stocks Jump

The CAC index has posted strong gains in the Wednesday session. Currently, the index is currently trading at 5210.30 and is up 1.37% on the day. On the release front, Eurozone Industrial Production impressed with a gain of 1.3%. In the US, Federal Reserve Chair Janet Yellen will testify before the House Financial Services Committee. France will release Final CPI on Thursday and Yellen testifies before the Senate Banking Committee on Thursday.

European stock markets have registered gains on Wednesday, and the CAC has jumped on the bandwagon. Oil prices pushed above $48 a barrel on Wednesday, as the American Petroleum Institute said crude inventories had plunged by 8.2 million, much more than expected. The report has boosted oil stocks, with French energy giant Total SA gaining 0.76%. Financial stocks are also up, as BNP Paribas and Societe Generale have gained 0.66% and 0.71%, respectively.

French president Emmanuel Macron promised political and economic change, and the French government isn’t wasting any time. France has promised to lower its budget deficit down to 3 percent of GDP. The 3 percent rule is required by the EU, but Brussels has chosen to turn a blind eye to the many members who run deficits above 3 percent. This move sends a message to the ECB that France is serious about economic reform. The French government is also eager to take advantage of Britain’s departure from the European Union. The government wants to project a “finance-friendly” image, which is critical in France’s efforts to lure financial sector jobs which are being relocated from London to the continent. On Tuesday, Prime Minister Edouard Philippe told a banking conference in Paris that he wants the city to become Europe’s main financial hub after Brexit. This will be a tall order, as Frankfurt will likely be the most attractive choice for German and other companies that are downsizing their operations in London. Still, Philippe’s comments underscore that France is looking for a bigger role on the international scene, and Brexit is a unique economic and political opportunity for Macron.

The Trump show is again on center stage in Washington, with more revelations about alleged secret ties between Russia and the Trump administration during the US election. This week’s breaking news is that Donald Trump Jr. admitted that a Russian official contacted him and offered to provide him with evidence incriminating Hillary Clinton. Trump and the White House are trying to lower the flames and put a positive spin on the meeting, but the media and lawmakers (including Republicans) aren’t about to let Trump off the hook. This crisis is just the latest miscue for the Trump administration, which hasn’t been able to pass any significant laws through Congress, even though Republicans control both the House of Representatives and the Senate. The latest dark cloud over the White House has dampened investor confidence in the US economy, and European stock markets could take advantage of the latest political scandal in the US.

Economic Calendar

Wednesday (July 12)

• 5:00 Eurozone Industrial Production. Estimate 1.0%. Actual 1.3%
• 10:00 US Fed Chair Janet Yellen Testifies

Thursday (July 13)

• 2:45 French Final CPI. Estimate 0.0%
• 10:00 US Federal Chair Janet Yellen Testifies

*All release times are EDT

*Key events are in bold

CAC, Wednesday, July 12 at 9:05 EDT

Open: 5158.50 High: 5206.00 Low: 5158.50 Close: 5210.30

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