CAC Inches Lower as Investors Search for Cues

The CAC index has ticked lower in the Thursday session. The index has dropped 0.32% and is currently trading at 5260.25 points. On the release front, the eurozone will release consumer confidence, which is expected to remain at -3 points. On Friday, the eurozone will release Manufacturing PMI, which continues to point towards expansion.

French stock markets lost ground on Wednesday, as falling oil prices weighed on share prices. Brent crude is down 4.6% this week, and has dropped below $45 a barrel, its lowest level since November 2016. June has been a disaster for oil producers, with Brent sinking 10.5% this month. With the world awash in oil, crude prices could be headed even lower. OPEC has made intensive efforts to cut production, but supply continues to outstrip demand. Lower oil prices have also taken the wind out of inflation in North American and Europe (with the exception of Britain), as central banks in the US, Japan and the eurozone continue to grapple with weak inflation levels that are well below the target of 2.0%. If crude continues to nosedive, the CAC could drop to lower levels.

The Federal Reserve raised interest rates last week, and also stated that it was ready to tackle its bloated balance sheet. The balance sheet has ballooned to $4.5 trillion, which accumulated after the 2008 financial crisis when the Fed went on a bond-buying spree to stimulate the economy. The reduction will be gradual, but still marks an important change in direction for the central bank. It’s not clear when the Fed will start to trim. FOMC member Patrick Harker said on Wednesday said that he was in favor of the reduction commencing in September, but added that the Fed had yet to determine a start date. As for additional rate increases, the Fed has hinted at one more rate hike in the second half of 2017, and the markets have circled December as the most likely date for a rate move. The CME Group has pegged the odds of a September hike at just 13%, compared to 18% a week ago. However, the odds for a December increase are at 49%, and this could increase if Fed policymakers continue to wax positive about the economy.

Philly Fed Harker Says Balance Sheet Could Start Shrinking in September

Thursday (June 22)

• 4:00 ECB Economic Bulletin
• 10:00 Eurozone Consumer Confidence. Estimate -3

Friday (June 23)

• 4:00 Eurozone Flash Manufacturing PMI. Estimate 56.9

*All release times are EDT

*Key events are in bold

CAC, Thursday, June 22 at 8:00 EDT

Open: 5252.00 High: 5231.50 Low: 5262.50 Close: 5260.25

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