The Paris stock exchange is expected to open slightly lower on Thursday morning, following the U.S. Federal Reserve's decision to continue its cycle of rate cuts--a move warmly welcomed on Wall Street last night before Oracle soured the mood with disappointing quarterly results.
As of 8:05 a.m., the CAC 40 futures contract was down 10 points at 8,018.5, signaling a weak start at the opening bell.
After its final monetary policy meeting of the year, the Fed on Wednesday cut its key interest rates by a quarter of a percentage point, as anticipated. It also lowered its inflation forecasts and announced an immediate return to balance sheet expansion through the purchase of Treasury Bills.
While Fed Chairman Jerome Powell did not adopt an especially dovish tone during his press conference, he also avoided sounding too restrictive, emphasizing that a rate hike was "nobody's scenario" within the FOMC.
The central bank also raised its growth forecasts, while noting a weakening labor market--a "Goldilocks" scenario that could justify further credit cost reductions next year.
"The Fed will therefore continue its cycle of rate cuts, and next week's inflation and employment figures will determine the magnitude and timing of the move," said Bastien Drut, Head of Strategy and Economic Research at CPRAM.
Proof that Jerome Powell succeeded in his communication exercise, the New York Stock Exchange finished sharply higher on Wednesday. The Dow Jones rose more than 1%, closing within about 200 points of its all-time high of 48,431.5. The broader S&P 500 gained 0.7% to 6,886.6, while the Nasdaq Composite advanced 0.3% at the close.
Signaling renewed risk appetite, the VIX volatility index on Wall Street fell 6% to 15.9, a "comfortable" zone where stress is no longer seen as an obstacle to risk-taking.
Given that the end of the year is traditionally a favorable period for equities, the outlook now seems clearer with hopes pinned on monetary policy, meaning that December's window-dressing could regain momentum.
"As I've said before--and at the risk of repeating myself--we are currently facing one of the most bullish cocktails imaginable for risky assets," said Michael Brown, market analyst at Pepperstone.
"Add to that the fear of missing out (FOMO), an ultra-favorable seasonality effect, and massive corporate share buybacks, and it's clear that the most obvious momentum remains decidedly bullish," he added.
"I remain quietly confident that the S&P 500 can reach the 7,000-point threshold by year-end," the strategist assured.
With the Fed hurdle now cleared, the S&P 500 appears well-positioned for an eighth consecutive monthly gain in December--a first in over 25 years.
As expected, U.S. yields fell after the Fed's decision, with the 10-year note returning toward 4.16%.
The dollar declined against most major currencies following the Fed's relatively dovish tone, allowing the euro to climb above 1.1690 against the greenback.
Oil prices edged lower after the announcement of a smaller-than-expected drop in U.S. crude inventories. Brent slipped 0.6% to $61.8 a barrel, while U.S. light crude (West Texas Intermediate, WTI) retreated 0.6% to $58.1.
However, risk appetite is being dampened by Oracle's weaker-than-expected quarterly results, with the stock plunging 11% in after-hours trading and dragging other tech giants with it, such as Nvidia (-2.7% after hours) and Microsoft (-1.2%).
"It's not just the numbers that are worrying, but above all the scale of its debt and its inability to reassure the market about its capacity to finance its massive investment projects," commented one trader.
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