CAC 40: limited position-taking ahead of US jobs report

The Paris Bourse is set to open with small gaps on Friday morning, as investors continue to play it safe ahead of the release of monthly US employment figures, the highlight of the week on the markets.

At around 8:15 a.m., the ‘future’ contract on the CAC 40 index – expiring in October – was down 9.5 points at 7,477.5 points, suggesting a wait-and-see but rather negative start to the session.

Penalized, among other things, by a persistently tense international geopolitical context, the Paris market ended Thursday’s session down 1.3% at 7,477 points.

For the week as a whole, the CAC is currently down around 4%, reflecting investors’ concerns over the recent resurgence of tension in the Middle East.

The pace of action is likely to remain limited on the eve of a crucial day, which will be marked primarily by the publication of the eagerly-awaited US employment report for September.

After the better-than-expected indicators published this week (Jolts, ADP, jobless claims), the figures to be released by the Labor Department at 2.30pm are bound to influence market expectations regarding the Fed’s monetary policy.

A weaker-than-expected employment report would reinforce the prospect of at least two 25bp rate cuts between now and the end of the year, or even the hypothesis of more substantial easing.

On the contrary, a better-than-expected report would revive the scenario of a more resilient-than-expected labor market, likely to push the Fed to slow its rate cuts, which would be a bearish catalyst for the markets.

‘If the market revises its expectations downwards in the face of resilient employment data, it could be a headwind for equities for some time, in a context where geopolitics is also weighing on sentiment’, warns Alexandre Baradez, Head of Market Analysis at IG France.

The consensus is for an average of 140,000 non-agricultural jobs to be created in September, after only 142,000 in August, which should confirm the hypothesis that the labor market is losing momentum.

On Wall Street, futures on the major US indices are currently pointing to a stable opening after yesterday evening’s anecdotal decline.

Trading remains limited in Asia, where equity markets are partially closed in China for the “Golden Week” holiday.

On the Tokyo Stock Exchange, the Nikkei index posted a minimal gain of 0.1% at the end of the session.

The trend is negative on the European bond market, where the yield on the ten-year German Bund is stretching above 2.14%.

On the other side of the Atlantic, benchmark bond yields are also trending upwards in anticipation of US statistics, at over 3.85% for ten-year US Treasuries.

The dollar continues to advance against the other major currencies ahead of the jobs report, continuing to play its role as a safe-haven asset in the light of worrying developments in the Middle East.

The dollar is currently up 1.3% against the euro over the week, taking the single European currency below the 1.1130 threshold.

The oil market, meanwhile, is back at more than one-month highs, with the buoyant trend created by the risk of conflagration in the Middle East showing no signs of abating for the time being.

U.S. light crude (West Texas Intermediate, WTI) is currently down 0.3% at $73.6, but has so far gained nearly 8% over the week, its best weekly performance since the start of the year.

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