CAC 40: Sentiment remains upbeat even the day after inflation

The Palais Brongniart, former headquarters of the Paris Stock Exchange. (Image credit: / L. Grassin)

(CercleFinance.com) – After its rise the previous day (+0.5%), which allowed it to return to positive territory over the course of the week, the Paris Stock Exchange should continue its rise on Thursday morning in the hope that the Indicators that do will be revealed later in the day, confirming the ebb in inflation in the United States.

As of 8:15 am, the “futures” contract on the CAC 40 index, due at the end of August, rose 22.5 points to 6545.5 points, signaling an open of about 0.3%.

Yesterday the Paris market managed to get back on track and breach the 6500 ceiling again thanks to data confirming that US inflation has undoubtedly peaked.

Indeed, the consumer price index rose 8.5% over the year in July, up from 9.1% in June and while economists had expected 8.7%.

“This is the first time inflation numbers have come this far below consensus in more than five years,” said Jim Reid, strategist at Deutsche Bank.

These new statistics, which allow the Fed to be more patient in its rate hike cycle, added to the positive momentum seen in equity markets since mid-June.

As inflation slows in the United States, investors have come to the conclusion that the Federal Reserve may raise interest rates only slightly this year or even lower them in 2023.

However, some analysts point out that the impact of inflation on the economy is deeper than expected and that the situation cannot be resolved without making painful decisions.

“More generally, inflation is proving more stubborn, suggesting that central banks may need to trigger a recession (rather than just a period of below-trend growth) to restore price stability,” notes Columbia Threadneedle Investments chief economist Steven Bell for the EMEA region.

In this regard, the latest US producer price figures, expected at 2:30 p.m., will be given particular scrutiny by stakeholders.

Consensus again expects the PPI index to slow down, which should have reached 0.3% in June versus +1.1% in May.

Investors will also be watching traditional jobless claims, which should confirm that the labor market remains just as dynamic across the Atlantic.