CAC Subdued as Eurozone Posts Mixed Data

The CAC index is almost unchanged in the Tuesday session. Currently, the index is at 5,236.80, up 0.15% on the day. On the release front, eurozone numbers were a mixed bag. The eurozone’s current account surplus jumped to EUR 25.1 billion, easily beating the forecast of EUR 22.3 billion. Eurozone ZEW Economic Sentiment improved to 32.4, short of the forecast of 31.7 points.

French President Emmanuel Macron ran on a platform to reform the economy, and the government plans to take a big first step later this week, with a labor reform that will make it easier for employers to hire and dismiss workers. The overhaul comes into effect on Sep. 22, but France’s largest unions have pledged to fight the move tooth-and-nail. A mass demonstration brought more than 200,000 to the streets, and another demonstration is scheduled for September 23. The government has promised further reforms to the country’s generous benefits system, specifically unemployment benefits and pensions. In the past, strikes and demonstrations by unions have managed to stave off major reforms. However, the government appears determined to move full speed ahead, and the markets will be watching closely to see who prevails in this round, the unions or the government.

The eurozone economy has rebounded in 2017, and much of the credit goes to Germany, the largest economy in the bloc. At the same time, inflation levels have been stubbornly low. This has complicated the ECB’s plans to reduce its quantitative easing scheme (QE), although ECB President Mario Draghi has said that the ECB will announce its plans to reduce QE at the October policy meeting. QE is scheduled to end in December, and policymakers will have to balance opposing interests as to what happens next. Germany, with its robust economy, would like to remove stimulus entirely, while less affluent eurozone members want to retain an accommodative monetary policy. We’re likely to see some compromise, in which stimulus is extended into 2018, but will be tapered from its current level of EUR 60 billion/month.

Economic Calendar

Tuesday (September 19)

• 4:00 Eurozone Current Account. Estimate 22.3B. Actual 25.1B
• 5:00 Eurozone ZEW Economic Sentiment. Estimate 32.4. Actual 31.7

*All release times are EDT

*Key events are in bold

CAC, Tuesday, September 19 at 8:20 EDT

Open: 5223.25 High: 5238.50 Low: 5219.00 Close: 5236.80

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