CAC Shrugs Off Soft French GDP, Consumer Data

The CAC index continues to head higher and at its highest level since January 29. In the Friday session, the CAC is trading at 5464 points, up 0.24% on the day. On the release front, key French indicators looked sluggish. GDP dropped to 0.3% in the first quarter, down from 0.6% in Q4 of 2017. This missed the estimate of 0.4%. Consumer data was even worse. Consumer spending fell from 2.4% to o.1%, short of the forecast of 0.4%. Preliminary CPI also dropped sharply, falling from 1.0% to 0.1%, which matched the estimate. In the US, Advance GDP is expected in at 2.0%.

French stock markets have posted strong gains in recent weeks. Although the French economy has slowed down in the first quarter, it has been all smiles for the CAC index. The index is on its way to a fifth straight winning week and has rocketed 6.5% since late March. The improved global economy has been a boon for the stock markets, and with the ECB continuing to purchase billions worth of bonds for its stimulus program, French stocks remain an attractive option for investors.

There were no dramatic comments from the ECB on Thursday, as the bank maintained its monetary policy and guidance. The rate statement said that “the Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases”. The stimulus program of EUR 30 billion/month is scheduled to remain in place until September, so investors shouldn’t even think about an interest rate hike until sometime in 2019. In his press conference, Mario Draghi said that the eurozone economy had slowed in the first quarter, but expressed “caution tempered by an unchanged confidence” that the ECB would realize its target of around 2 percent inflation. Although the ECB has said that it plans to wind up stimulus in September, this is not a date set in stone – if second-quarter numbers are not strong, the ECB could continue to the stimulus scheme into 2019.

The $ continues to test the fringes of bullishness

ECB Keeps Policy, Guidance Unchanged

Economic Calendar

• 1:30 French Flash GDP. Estimate 0.4%. Actual 0.3%
• 2:45 French Consumer Spending. Estimate 0.4%. Actual 0.1%
• 2:45 French Preliminary CPI. Estimate 0.1%. Actual 0.1%
• 8:30 US Advance GDP. Estimate 2.0%

*All release times are DST

*Key events are in bold

CAC, Friday, April 27 at 6:25 EDT

 Open: 5425 High: 5453 Low: 5470 Close: 5467

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