After two consecutive sessions of gains, the Paris Stock Exchange is expected to continue its advance on Friday morning, on the hope that employment figures to be released this afternoon in the US will confirm the slowdown in the US labor market.
Around 08:15, the CAC 40 index ‘futures’ contract – for July delivery – rose 13.5 points to 7,720 points, suggesting a favorable start to the session.
After four weeks of intense turbulence, the Paris market appears to have calmed down since the start of the week, but remains weighed down by uncertainty surrounding the outcome of Sunday’s second round of legislative elections.
At this stage of the week, the CAC 40 is still posting a weekly gain of nearly 3%.
Unless there is a major error in the polls, the political situation in France should be a little less of an indicator for the CAC 40 over the coming sessions,” says Christopher Dembik, Investment Strategy Advisor at Pictet Asset Management.
“This makes sense: on average over 60% of the sales of the top companies on the list are generated abroad,” he explains.
“This puts into perspective the immediate effect of the legislative elections on the business of these companies”, concludes the analyst.
In a strategy note published yesterday, Morgan Stanley strategists reckon now is a good time to buy French stocks in light of a possible ‘surge’ in easing after Sunday’s vote.
In Britain, Labour’s surprise victory in yesterday’s general election, which ended 14 years of Conservative rule, is being greeted with no emotion by the markets.
However, caution is likely to be the headline ahead of the release of monthly US employment figures, which are likely to influence the Fed’s future decisions.
The US labor market has been slowly but surely slowing for several months, which could prompt the central bank to clarify its rate cut plan soon.
The consensus is for a slowdown in nonfarm payrolls to 190,000 in June, with the jobless rate unchanged at 4%.
While investors will have their eyes on US employment statistics, they will also be looking at German industrial production figures, followed by eurozone retail sales, due later this morning.
As the New York Stock Exchange closed yesterday for Independence Day, equity markets are also gearing up to end the week on a positive note.
During the week, which was cut short by the bank holiday, the Dow Jones edged up around 0.5% since Monday, while the Nasdaq gained a more convincing 2.5%.
In the European bond market, the French ten-year OAT yield eased to 3.27% after yesterday’s successful treasury auctions.
The German Bund continues to trade at around 2.60%, giving a stable spread of around 67 points, synonymous with the decline in the risk premium associated with French assets.
The oil market, for its part, is heading for a fourth consecutive week of gains, supported in particular by Wednesday’s announcement of a drop in US crude inventories.
Brent crude is currently consolidating 0.3% at $87.1 a barrel, while West Texas Intermediate (WTI) is down 0.2% at $83.7.
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