CAC Drops as Oil Prices Sag to 7-Month Low

The CAC index has posted losses in the Wednesday session. The index has dropped 0.53% and is currently trading at 5254.80 points. On the release front, there are no economic indicators out France or the eurozone.

Oil prices were down sharply on Tuesday, as Brent crude declined 3.5%. Currently, Brent crude is trading below $46 a barrel, its lowest level since November 2016. This has weighed on global stock markets, and sent the CAC lower on Wednesday. June has been a disaster for oil producers, with Brent sinking 10.5% this month. With the world awash in oil, crude prices could be headed even lower. OPEC has made intensive efforts to cut production, but supply continues to outstrip demand. Lower oil prices have also taken the wind out of inflation in North American and Europe (with the exception of Britain), as central banks in the US, Japan and the eurozone continue to grapple with weak inflation levels that are well below the target of 2.0%.

The Fed has tightened policy twice this year and has hinted at one more rate hike in the second half of 2017. As for the markets, they have circled the December policy meeting as the most likely date for a rate move. The CME Group has pegged the odds of a September hike at just 13%, compared to 18% a week ago. However, the odds for a December increase are at 49%, and this could increase if Fed policymakers continue to wax positive about the economy. Earlier this week, Federal Reserve of New York President Charles Dudley continued the upbeat message, cautioning the Fed against halting its current tightening cycle. Dudley said that the tight labor market should lead to higher wages, which in turn would push inflation to the Fed’s target of 2.0%. The markets like what they are hearing – not just the positive spin on the economy, but also that the Fed has signaled that it plans to reduce the bloated balance sheet of $4.2 trillion.

Oil Spill Sends Stocks and Yields Lower, Dollar Steady

Wednesday (June 21)

• There are no French or eurozone events

Thursday (June 22)

• 4:00 ECB Economic Bulletin
• 10:00 Eurozone Consumer Confidence. Estimate -3

*All release times are EDT

*Key events are in bold

CAC, Wednesday, June 21 at 9:20 EDT

Open: 5266.50 High: 5269.50 Low: 5220.80 Close: 5267.30

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