CAC Under Pressure Ahead of French Election

The CAC 40 has dropped to the 5000 level, as the index is trading at 5,007.80 in Tuesday trade. On the release front, there are no events out of the eurozone. On Wednesday, the eurozone releases Final CPI, with the indicator expected to soften to 1.5 percent.

After an Easter holiday on Monday, the CEC has resumed trade on Tuesday. The CAC has posted losses, and briefly dropped below the symbolic 5000 level. Investors are keeping a keen eye on the French presidential election, with the first round of voting on April 23. The race remains extremely tight, with centrist Emmanuel Macron and far-right candidate Marine Le Pen tied at 22 percent. They are followed by Francois Fillon at 21% and Jean-Luc Melenchon at 18 percent. If Macron and Le Pen reach the second round, Macron is expected to win decisively by a margin of 64-36. With only a few days to go before the vote, any change in polling numbers could have a significant impact on the stock markets. Another factor weighing on the stock market is the crisis over North Korea, as the US continues to warn North Korea that that it will not allow the rogue country to continue to test ballistic missiles. US vice-president Mike Pence is in Japan for talks with Japanese officials, with trade issues and North Korea high on the agenda.

The eurozone won’t release its first event this week until Wednesday, with the release of Eurozone Final CPI for March. CPI has improved over six straight months, and the February reading of 2.0% was noteworthy as it reached the ECB inflation target. This strong figure has raised speculation that if inflation levels continue to move higher, the ECB may have to consider tightening policy in order to curb inflation. However, the markets are expecting the March reading to drop to 1.5%, which would make it eaiser the ECB to hold its monetary course. The ECB’s asset-purchase program is scheduled to remain in place until December, although the central bank could opt to bring up that date or taper the program if growth and inflation numbers in the eurozone are unexpectedly strong. There are also political considerations at play, as the ECB is reluctant to make any significant monetary moves with upcoming elections in France and Germany.

Economic Calendar

Tuesday (April 18)

• There are no Eurozone releases on the schedule

Wednesday (April 19)

• 8:00 Italian Trade Balance. Estimate 2.24B
• 9:00 Eurozone Final CPI. Estimate 1.5%
• 9:00 Eurozone Final Core CPI. Estimate 0.7%
• 9:00 Eurozone Trade Balance. Estimate 18.6B

*All release times are EST

*Key events are in bold

CAC, Tuesday, April 18 at 8:10 EST

Open: 5078.30 High: 4993.50 Low: 5081.50 Close: 5007.80

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