The Paris Stock Exchange has remained directionless since the opening bell, with the CAC 40 (-0.1%) hovering near flat territory around 8,105 points, extending the lack of initiative that has characterized the past six sessions. Similarly, the Euro Stoxx 50 appears completely frozen at approximately 5,725.
Reflecting heightened investor caution after a successful 2025 trading year so far, the Paris market traded within an exceptionally narrow range last week, between 8,040 and 8,160 points, with daily moves limited to between -0.1% and 0.4%.
This lack of momentum has also been mirrored on Wall Street over the last six sessions, where major indices posted marginal gains last week (+0.1% for the S&P 500), allowing them to approach their all-time highs, with the Nasdaq now less than 2% from its peak.
On Monday, the Nasdaq edged down by -0.1%, the Dow Jones by -0.2%, and the S&P 500 by -0.15%--a fitting summary of the wait-and-see attitude prevailing ahead of the Federal Reserve's statement expected in 48 hours.
Barring a major surprise, nothing appears likely to alter expectations for another 25 basis point cut in U.S. interest rates, given recent signs of a slowdown in employment and improved control over inflation trends.
This would bring the total monetary easing by the U.S. central bank since September 2024 to 1.75 basis points--a level unprecedented outside of recessionary periods in the U.S., especially with inflation still above the Fed's target.
Yet for the past ten days, even as the "FedWatch" tool predicts an 85-90% chance of a rate cut, yields have continued to deteriorate: T-Bonds are up 4.8 basis points to 4.188%, and the two-year yield is up 4.2 basis points to 3.606%--levels last seen in mid-November, when a third rate cut seemed unlikely for December 10.
Even though a rate cut appears largely priced in, a dovish message accompanying the decision could stimulate appetite for risk assets at the end of the year--a period typically favorable for equities and potentially paving the way for the much-anticipated "Santa Claus rally."
Some analysts believe it is not entirely out of the question for the S&P 500 to reach the symbolic 7,000-point mark by December 31, before potentially heading toward 7,500 points in early 2026--a major psychological target cited by many strategists.
Once the Fed meeting concludes, attention will inevitably turn to 2026, a year that will see a new chair take the helm at the Federal Reserve--expected to be Donald Trump's trusted economic advisor, Kevin Hassett, though he has not yet been officially appointed.
Equity markets typically welcome rate cuts, but the prospect of an even more dovish approach from the central bank, with a new chair known for his accommodative stance, could begin to unsettle some market participants.
The recent flurry of rate cuts could place the resilient U.S. economy at risk of overheating, potentially forcing the Washington-based institution to pause or even reverse course and hike rates again--possibly triggering a renewed recession, some experts warn.
"We see good reasons for the Fed to start showing more caution and to slow its rate cuts," forecasted Henry Alle, market analyst at Deutsche Bank, last week.
Meanwhile, the economic calendar and corporate earnings news are expected to remain relatively quiet, though Oracle's quarterly results, due Wednesday evening, will attract particular attention.
The software developer's stock soared nearly 40% after its previous earnings release, following the disclosure of a massive cloud order backlog driven by robust AI investments. However, the share has since surrendered all those gains amid doubts about the sustainability of the exceptional cycle that has propelled U.S. tech for the past three years.
As a result, the outlook provided by the California-based group will be even more closely scrutinized.
© 2025 Zonebourse.com - All rights reserved.
