The CAC index has reversed directions and posted slight gains on Tuesday, rising 0.31 percent. Early in the North American session, the CAC is at 5260.25 points. On the release front, French Final Nonfarm Payrolls remained at 0.4%, edging above the estimate of 0.3%. Eurozone ZEW Economic Sentiment improved to 37.7, beating the estimate of 37.2 points. On Wednesday, the eurozone publishes Employment Change and Industrial Production. In the US, it’s a busy day, with the release of retail sales and CPI. As well, the Federal Reserve is expected to increase interest rates by a quarter-point to 1.00%.
The CAC started the week with losses, as European stock markets reacted to sharp losses on the Nasdaq, which dropped 1.8% on the Friday session. Heavyweight technology stocks were lower, and Apple led the downturn with losses of close to 4 percent. This had a negative impact on the French financial stocks, as BNP Paribas and Societe Generale lost ground. The French stock markets didn’t show much reaction to the French parliamentary election, in which President Emmanuel Macron won the most votes. The first round was held on Sunday, and the second round, slated for June 18, will determine the makeup of the 557-seat National Assembly. French President Emmanuel Macron has hit a chord with the public with his call for a united, prosperous France, and he appears headed for a massive majority in parliament. The traditional left-right divide in French politics appears to have dissolved, at least for now, as Macron’s En Marche party, which is barely a year old, is poised to take over France. Macron is expected to put forward pro-business legislation, which will not sit well with the powerful labor unions. Macron wants to streamline government and overhaul labor laws, in order to kickstart the economy and create jobs. Any changes to France’s generous employment benefits is bound it be contentious, but a strong majority in parliament will make Macron’s job easier.
The Federal Reserve has commenced its monthly policy meeting and will issue a rate statement on Wednesday. The markets have priced in a quarter-point hike at almost 100%, which would be the second increase in 2017. The dollar is unlikely to show much movement, unless the Fed shocks and doesn’t press the rate trigger. What’s in store after that? The markets are skeptical about another rate hike in the second half, unless the political situation in Washington shows signs of stabilizing. The Trump administration remains in damage control mode, as it’s difficult to assess the damage from the dramatic evidence of ex-FBI director James Comey. The Trump administration continues to lurch from one crisis to another, and President Trump seems disconnected not just from the Democrats, but from many Republican lawmakers as well. The Fed and the markets have serious concerns with regard to Trump’s ability to move forward with his economic agenda, and this sentiment could weigh on the US dollar.
Tuesday (June 13)
- 1:30 French Final Nonfarm Payrolls. Estimate 0.3%. Actual 0.4%
- 5:00 Eurozone ZEW Economic Sentiment. Estimate 37.2. Actual 37.7
Wednesday (June 14)
- 5:00 Eurozone Employment Change. Estimate 0.3%
- 5:00 Eurozone Industrial Production. Estimate 0.5%
- 8:30 US CPI. Estimate 0.2%
- 8:30 US Retail Sales. Estimate 0.1%
- 14:00 US FOMC Statement
- 14:00 US Federal Funds Rate. Estimate <1.25%
*All release times are EDT
*Key events are in bold
CAC, Tuesday, June 13 at 8:50 EDT
Open: 5254.65 High: 5272.75 Low: 5247.50 Close: 5260.25