The CAC index is lower in Tuesday trading. Currently, the index is trading at 5190.50, down 0.81% on the day. In economic news, it’s a quiet day. On the release front, Eurozone ZEW Economic Sentiment softened, coming in at 35.6 points. This reading missed the forecast of 37.2 points.
European stock markets are lower on Tuesday, responding to soft investor confidence surveys in Germany and the eurozone. The ZEW Economic Sentiment surveys gauge the optimism of institutional investors and analysts. Both surveys showed weaker optimism in June compared to the May releases. With the eurozone economy continuing to expand and the unemployment picture improving, the dip in investor confidence is likely due to the stronger euro, which has made European exports more expensive.
France has voted for change by electing President Emmanuel Macron, and the new French government is looking to take on a bigger role in Europe and on the international scene. Macron hasn’t had to look far, as the messy departure of Britain from the EU could be a golden opportunity for France, both politically and economically. One casualty of Brexit is the City of London, a key financial hub. Many European companies will be downsizing their London operations, and the French are eager to snare a share of the spoils. French officials are actively courting companies to consider moving to Paris, rather than to other locations such as Frankfurt.
There was more bad news for President Trump, as his health care bill, which replaces much of Obamacare, has stalled in the Senate, after two Republicans announced they would not support the bill. The Republican leadership has admitted defeat, saying it will not attempt to advance their health care proposal before Congress takes a recess in August. This decision is a major setback for President Trump, who had made a new health care act a key part of his agenda. Despite Republican control of both houses of Congress and the White House, no major legislation has been passed since Trump took over as president 6 months ago. With this latest defeat, there is growing skepticism as to whether Trump will be able to convince Congress to pass other key parts of his agenda – tax reform and fiscal spending.
The US labor remains close to capacity and the unemployment rate is sparkling, at just 4.4%. So why is inflation mired at low levels? Economists are puzzled, and the Federal Reserve is also at a loss, although Fed Chair Janet Yellen insists that it’s only a matter of time before inflation moves higher. In testimony before a Senate committee last week, Yellen insisted that it was "premature to conclude that the underlying inflation trend is falling well short of 2 percent", and that with a strong labor market "the conditions are in place for inflation to move up". However, the markets remain skeptical that the Fed will make a move before the end of the year, with the odds of a December hike at just 47%, according to the CME Group.
