CAC Shows Strong Gains as Bank Shares Jump

The CAC index has posted strong gains in the Tuesday session. Currently, the index is trading at 5183.50, up 1.07% on the day. It’s a quiet day on the release front, with no events out of France or the eurozone. On Wednesday, the Federal Reserve will publish its rate statement.

After a quiet start to the week, the CAC is on the move on Tuesday. Bank stocks have led the way, posting strong gains. BNP Aribas has gained 1.93%, while Credit Agricole is up 2.48%. BNP Aribas will be in the spotlight on Friday, as the bank releases its interim 2017 earnings report. The week started out in fine fashion, as French Manufacturing PMI improved to 55.4, its highest level in three months. Although Eurozone Manufacturing PMI was softer in July, dropping from 57.3 to 56.8, it still pointed to solid expansion, so the markets are unlikely to fret over this reading. The eurozone and French manufacturing sectors have received a boost from stronger exports as well as increased consumer demand. Improved economic conditions in the eurozone have boosted the euro, which has jumped 9.8% against the dollar since March 1. The high exchange rate has weighed on exporters’ shares, and the CAC has shown only marginal gains since April 1.

The Federal Reserve will be back in the spotlight this week, as policymakers meet for the monthly policy meeting on Tuesday and Wednesday, With the odds of a rate hike at just 3%, the markets will be focused on the Fed’s rate statement, which will be released on Wednesday. US numbers in the second quarter have been mixed, and inflation remains well below the Fed target of 2%. Given these economic conditions, investors are unsure if the Fed will raise rates in December, with the odds currently at 47%, according to the CME Group. Analysts will be looking for nuances in the language of the statement, and a dovish tilt from the Fed could hurt the dollar and boost the red-hot euro. In addition to interest rate policy, policymakers will be discussing the $4.2 trillion bond balance sheet, a result of the aggressive quantitative easing program which was put in place after the financial crisis in 2008. In June, the Fed outlined plans to reduce its bloated balance sheet, with experts circling September as the start date of the reduction. Any hints in the rate statement about a starting time for the reductions could boost the US dollar.

Economic Calendar

Tuesday (July 25)

• There are no French or eurozone events

Wednesday (July 26)

• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.25%

*All release times are EDT

*Key events are in bold

CAC, Tuesday, July 25 at 6:55 EDT

Open: 5133.50 High: 5188.50 Low: 5133.50 Close: 5183.50

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