The Paris Stock Exchange falls as the Fed delays lowering rates

The Paris Stock Exchange is expected to open sharply lower this Friday, with investors fearing that the strength of the American economy will delay the long-awaited first rate cut from the Fed. The CAC 40 could lose 0.58% at the opening according to analysts.

Towards a sharply falling opening for the CAC 40

European indices should start Friday's session in the red, following in the footsteps of Wall Street which ended in decline on Thursday evening. According to initial indications, the CAC 40 could lose 0.58% at the opening, after having gained 0.13% the day before to close at 8,102.33 points.

“The trend was impacted by better than expected economic statistics which could suggest that the Fed wants to wait longer than expected before lowering its interest rates“, explain John Plassard, investment specialist at Mirabaud.

The S&P Global composite PMI index, which measures American economic activity across all sectors, reached its highest level in 25 months in May. Services shined and even manufacturing showed signs of recovery.

This dynamism risks encouraging the American central bank to maintain a restrictive monetary policy for longer, while the markets are hoping for a rate cut from September.

The Fed determined to curb inflation even if it means slowing growth

To bring inflation back to its 2% target, the Fed drastically raised its rates between March 2022 and July 2023, bringing them to their highest level in 20 years, in a range of 5.25 to 5.50%. They have remained unchanged since, with the central bank adopting a wait-and-see position.

But the latest activity figures suggest that the American economy is resisting monetary tightening better than expected. The Fed could therefore be tempted to keep its rates high for longer to ensure that inflation is well contained, even if it means risking a sharp economic slowdown.

On the Paris Stock Exchange, TotalEnergies will be in the spotlight. Its CEO Patrick Pouyanné confirmed that he was studying a dual listing of the group in Paris and New York, without specifying whether the American market would become the main one.

Furthermore, TotalEnergies is preparing for a tense general meeting this Friday, with climate activists planning to disrupt this meeting where shareholders must vote on climate resolutions and the reappointment of the CEO.

For its part, SEB defended its strategy on PFAS, or “eternal pollutants”, and tried to reassure its shareholders gathered at a general meeting on Thursday.

The Paris Stock Exchange should therefore suffer this Friday, penalized by the fear that the Fed will further delay the hoped-for “pivot” towards a more accommodating monetary policy. The star stocks of the CAC 40 like TotalEnergies will nevertheless remain at the center of investors' attention.