The CAC index has posted gains in the Tuesday session. Currently, the CAC is trading at 5,397.00, up 0.19% on the day. Earlier on Tuesday, the index punched above the 5400 level for the first time since mid-May. On the release front, French Manufacturing PMI improved to 56.7, beating the estimate of 56.2 points. French Services PMI also accelerated to 57.4, above the forecast of 57.0 points. This marked a 5-month high. There was more positive news, as Eurozone Services and Manufacturing PMIs both beat their estimates and pointed to expansion.
Investors are in a positive mood on Tuesday, ahead of the ECB policy meeting on Thursday. ECB President Mario Draghi will have to maneuver carefully, as the ECB decides whether to start unwinding its asset purchases program, which is currently pegged at EUR 60 billion/month. Back in the summer, the ECB said it would trim the program in the "autumn", but didn’t make any moves at the September meeting. A reduction in stimulus could have a significant effect on the euro. With the French economy enjoying the economic rebound in the eurozone, French stock markets have responded with gains, and the CAC has gained an impressive 5.3% since September 1. President Macron’s plans to reform the economy have been well-received by investors, and the government seems intent on overhauling labor laws and making France much more competitive, which should continue to boost French stock markets.
The crisis in Catalonia has entered its third week, and with the central and Catalan governments entrenched in their positions, the worst may be yet to come. On Saturday, the central government said it was imposing direct rule, invoking Article 155 of the Spanish Constitution. However, there is plenty of uncertainty, as this clause has never been used. Madrid has said it will remove Catalan President Carles Puigemont from power, take over the media and hold new elections for the region. Unsurprisingly, the Catalan government has condemned this latest salvo and has called for "massive civil disobdience". Developments are unfolding daily, and investors are nervously watching the trouble in Spain, the eurozone’s fourth largest economy. The European Union has refused to intervene, calling the crisis an internal matter. So far, the woes in Catalonia has not affected the euro.
