HomeContributorsFundamental AnalysisCAC Edges Higher as German Election Fallout Subsides

CAC Edges Higher as German Election Fallout Subsides

The CAC index has posted slight gains in Wednesday trade. Currently, the index is at 5,279.30, up 0.20% on the day. There are no major eurozone events on the schedule.

German industrial giant Siemens AG announced on Tuesday that it would merge rail operations with Alstom SA, a French train manufacturer. The merger is aimed as a response to growing competition in the rail transport sector, particularly from the Chinese state-owned railroad, CRRC. The merger still needs to be approved by regulators, but is already being hailed by French President Emmanuel Macron, who wants to strengthen economic ties between France and Germany, the two largest economies in the eurozone. On Tuesday, Macron came out in favor of stronger European integration and also called for the eurozone to have its own budget and finance minister. Macron went as far as proposing that Germany and French completely integrate their markets and corporate rules by 2024. However, Macron may find serious resistance to his plan in post-election Germany, where a weakened Angela Merkel will have her work cut out cobbling together a coalition. The pro-business FDP, a possible junior partner for Merkel, responded to Macron’s speech by rejecting his call for a eurozone budget.

ECB President Mario Draghi was careful not to make headlines on Monday, in his testimony before the European Parliament Economic and Monetary Affairs Committee. Draghi acknowledged that there was uncertainty regarding the inflation outlook, adding that recent volatility in the exchange rate would require monitoring. Draghi remains committed to the ECB’s loose monetary policy, saying that "ample" accommodation is still needed in order to raise inflation levels. Some policymakers have come out in favor of tightening monetary policy, with the eurozone economy continuing to grow and unemployment falling. However, inflation remains well below the ECB target of just below 2 percent. Draghi told lawmakers that he is confident that the inflation target will be met, but that would require avoiding any hasty changes to current monetary policy and declared that the ECB would remain "patient and persistent".

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