The CAC continues to have a quiet week, as the index shows limited movement in the Tuesday session. Currently, the CAC is trading at 5401.35, down 0.48 percent. On the economic front, Eurozone Flash GDP climbed 0.5%, matching the forecast. French Final CPI posted weak gains of 0.1%, also matching the estimate. There was excellent news from Eurozone ZEW Economic Sentiment, which jumped to 35.1, easily beating the forecast of 29.1 points. On Wednesday, the eurozone releases Final CPI, which is expected to rise to 1.9%.
The French economy was a major issue in the recent presidential campaign, and all eyes are on incoming president Emmanuel Macron to make substantive changes that will kick-start the weak French economy. Inflation slipped to 0.1% in April, after an unexpectedly strong showing in March, which showed a gain of 0.6%. Meanwhile, the spotlight remains on the French political front, with President Emmanuel Macron choosing Edouard Philippe, a conservative lawmaker, as his new prime minister. Macron has pledged to dismantle the left-right divide which has characterized French politics for decades, and his choice of Macron, who has support on both sides of the aisle, is an important first step in his goal of unifying the country.
The CAC remains at high levels, buoyed by improved growth in the eurozone. Market predictions for Eurozone GDP were on target, as Flash GDP came in at 0.5% in the first quarter of 2017. This reading was unrevised from Preliminary Flash GDP back in April. The well-respected ZEW Economic Sentiment surveys, which gauge optimism among investors and analysts, were a mixed bag for May. The German indicator improved to 20.6, short of expectations. What was more surprising was the unexpected jump from the Eurozone indicator, which improved to 35.1, its strongest level in almost two years. With the eurozone showing stronger growth, has inflation kept up? We’ll get an indication on Wednesday, with the release of Eurozone Final CPI, which is expected to rise to 1.9%. Stronger inflation levels will increase pressure on the ECB to consider tapering its ultra-loose monetary policy. Germany, for one, is finding that ultra-low interest rates is hampering growth, and wants Brussels to adopt a tighter monetary policy.
President Trump has been pressing the damage control button since last week, as the White House and Congress remain focused on the fallout from Trump’s dismissal of FBI director James Comey. There was more bad news for President Trump on Tuesday, with a report in the Washington Post that Trump had shared confidential intelligence reports with Russia’s foreign minister at a meeting last week. The White House has denied the report, but the timing is particularly bad for Trump, who is already under investigation for possible Russian involvement in the presidential campaign. The markets are concerned that Trump will be so busy trying to put out political firestorms, that his agenda of increased fiscal spending and tax reform will stall. These jitters could hurt investor confidence and send global stock markets lower.
Economic Calendar
Tuesday (May 16)
- 2:45 French Final CPI. Estimate 0.1%. Actual 0.1%
- 5:00 Eurozone Flash GDP. Estimate 0.5%. Actual 0.5%
- 5:00 German ZEW Economic Sentiment. Estimate 22.3. Actual 20.6
- 5:00 Eurozone Trade Balance. Estimate 18.8B. Actual 23.1B
- 5:00 Eurozone ZEW Economic Sentiment. Estimate 29.1. Actual 35.1
Wednesday (May 17)
- 5:00 Eurozone Final CPI. Estimate 1.9%
*All release times are EDT
*Key events are in bold
CAC, Tuesday, May 16 at 8:30 EDT
Open: 5393.15 High: 5405.60 Low: 5385.50 Close: 5401.35
