The CAC index has posted small gains in the Wednesday session. Currently, the index is trading at 5187.80, up 0.29% on the day. In economic news, there are no French or eurozone events on the schedule. We’re likely to see more movement from European stock markets on Thursday, as the ECB will release its monthly rate statement.
On Tuesday, the CAC suffered its worst day this month, dropping 0.8 percent. French stock markets were down in response 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 indicated that investor confidence in June had weakened compare to the May readings. With the eurozone economy improving, analysts attributed the dip in investor confidence as due to the stronger euro, which is making European exports more expensive and thus less attractive for foreign buyers.
The markets are keeping close tabs on the ECB, which will release a rate statement on Thursday. The meeting could prove to be a non-event, as the bank is unlikely to make any changes to its asset-purchase program (QE). With the eurozone showing improvement in 2017, there has been speculation that the bank might taper QE or change the expected end of the scheme, which is December of this year. The ever-cautious ECB was shocked last month, when comments from ECB President Mario Draghi about tweaking QE triggered a sharp rally from the euro. If the eurozone economy continues to show strong numbers, we could see the ECB make some adjustments to monetary policy in its September meeting. In December 2016, the bank tapered QE while at the same time extending the scheme until December of this year, and this type of scenario could be adopted once again. Analysts will be combing through the July statement, as well as Draghi’s press conference, looking for any nuances or tweaks which could hint at substantive changes come September.
With the election of President Emmanuel Macron, who ran a campaign promising political and economic change, France is looking to take on a bigger role in Europe and on the international scene. French officials are keeping a close eye on Brexit developments, as the messy departure of Britain from the EU could be a golden opportunity for France, both politically and economically. One likely casualty of Brexit will be the City of London, which until now has been a key financial center in Europe. However, with Britain leaving the EU, many European companies and banks will be downsizing their London operations, and the French are eager to snare a share of the spoils. France plans to cut its corporate tax from 33.3% to 25% by 2022, and French officials are actively courting companies to consider moving to Paris, rather than to other locations such as Frankfurt.
