The French stock market continues to lose ground this week, as the CAC index has dropped 0.74 percent in the Tuesday session. Currently, the CAC is trading at 5,268.80 points. On the release front, there are no major eurozone events. Two retail sales indicators weakened, raising concerns about the strength of consumer spending. Retail PMI dipped to 52.0, down from 52.7 points. As well, Retail Sales dropped to 0.1%, down from the previous reading of 0.3%. This was short of the estimate of 0.2%. On a positive note, Eurozone Sentix Investor Confidence improved for a fourth straight month. The indicator climbed to 28.4 points in June, above the estimate of 27.6 points.
French stock markets have been drifting over the last few weeks, but that could change, as French voters go to the polls on June 11. In two rounds of voting, the French electorate will choose the 577 members of the National Assembly. French President Emmanuel Macron’s LREM party is on track to win the first round, with the latest polls giving Macron’s party 30 percent of the vote, well ahead of the conservative Republicans, who are well behind at 22 percent. Polls also show the LREM forming a majority in parliament. This would enable Macron to implement his pro-business agenda, so the French stock market could react to a Macron majority with strong gains.
The ECB is expected to hold course with its monetary policy, when policymakers meet on Thursday and set the new benchmark rate. The central bank has maintained the rate at a flat 0.0% since March 2016, and no change is expected at the upcoming meeting. At the same time, euro-area growth was respectable in the first quarter, and the markets would like the ECB to acknowledge the improvement in its rate statement or at ECB President Mario Draghi’s press conference. The ECB has been cautious and is not expected to announce any changes to its asset-purchase program, which winds up in December. Will the ECB send out a hawkish message? Analysts will be poring over the rate statement and Draghi’s follow-up comments, and any nuances or hints about a tighter monetary policy could push the French stock market to higher levels.
