(CercleFinance.com) – After six consecutive weeks of decline, the Paris Stock Exchange should not be able to move forward on Monday, still affected by the headwinds which have been pushing it back for several months now.
Around 8:15 a.m., the 'futures' contract on the CAC 40 index – December delivery – fell by 100.5 points to 7142.5 points, suggesting a drop of more than 1% to start the week.
Political uncertainty in France combined with the gloomy economic outlook of the Old Continent has prevented, since this summer, the CAC 40 from following the upward trajectory taken by Wall Street.
French Prime Minister Michel Barnier will face a first important test this Monday with the adoption of his Social Security financing bill, which could lead to the tabling of a motion of censure by the National Rally.
'If the current situation is not (yet) critical, it is certain that the financial markets are closely scrutinizing French political developments and the absence of a budget, coupled with the fall of the government, would create uncertainty and a probable increase in the deficit in 2025 compared to current forecasts, which would push rates up,' warns Sylvain Bersinger, chief economist at Asterès.
The good news for France is that the OAT/Bund spread narrowed from 88 to 82 points on Friday, before S&P decided to maintain the French debt rating.
After the Thanksgiving break, the week promises to be busy on the markets, with a series of economic indicators on the program and the highlight being the employment figures in the United States, which could be decisive for the evolution of the Fed's monetary policy.
Due to year-end balance sheet adjustments, December is traditionally a good month for the stock markets since the S&P 500 index gains on average 2% during the last month of the year.
Wall Street posted a new set of records on Friday for the shortened 'Black Friday' session, but some caution could be felt heading into Friday's jobs report, with the S&P already posting an increase of more than 26% this year.
Economists are counting on average on 200,000 jobs created in November, after the 12,000 announced in the first estimate for October, and on an unemployment rate of 4.2% compared to 4.1%.
The statistic – particularly followed by the Fed – should help it determine the timing of its next rate cuts, knowing that an easing of 25 basis points on December 18 is integrated by 67% by investors, according to the CME’s FedWatch tool.
From this perspective, figures that are too strong could paradoxically be unwelcome by investors worried about seeing the central bank slow down its measures to support the economy.
Friday's statistics will be preceded by the ADP survey on job creations in the private sector on Wednesday and by weekly unemployment registrations on Thursday.
Among the other indicators on the menu for the week are the ISM purchasing managers' indices, including that measuring activity in the manufacturing sector which will be published this afternoon.
The week will also be marked by a burst of statistics which will provide a more precise idea of the state of the European economy, notably with the manufacturing PMI indices expected in the morning.
