HomeContributorsFundamental AnalysisCAC Edges Lower as French Industrial Production Contracts

CAC Edges Lower as French Industrial Production Contracts

The CAC index has rolled off five straight winning sessions, but is in red territory in the Wednesday session. Currently, the index is at 5506.50, down 0.34%. It’s a light day on the release front, with no eurozone indicators. French Industrial Production disappointed, posting a decline of 0.5%, edging below the estimate of -0.4%. On Thursday, the eurozone releases Industrial Production and the ECB will publish the minutes of the December policy meeting.

Global stock markets have jumped out of the gates in 2018, and the CAC has also pushed higher, posting strong gains of 3.8% in January. Investors are giving the eurozone economy a thumbs-up, as the bloc is on track for a solid fourth quarter, as growth continues and unemployment falls. Inflation has also moved higher, although the ECB is unlikely to reconsider its current stimulus program, which ends in September.

The year 2017 was a good one for the eurozone, marked by strong growth. The labor market has also rebounded, as unemployment steadily declined over the course of 2017. In December, the reading dropped to 8.7%. This marked its lowest level since March 2009, when the rate stood at 8.5%. This is yet another indication of the impressive rebound in the eurozone economy, as growth has been steady and the employment picture has improved. Retail Sales, the primary gauge of consumer spending, posted a strong gain of 1.5% in December, after a decline of 1.1% in November. European stock markets have responded with strong gains, and the CAC has gained ground since the New Year. If the eurozone economy continues to impress early in 2018, the CAC should continue to move higher.

The political deadlock in Germany has been a setback for French President Emmanuel Macron, a staunch proponent of European unity. Macron has grandiose plans for the further integration of the eurozone, such as harmonizing corporate tax regimes and establishing a eurozone budget. Merkel would make an ideal partner to reform the bloc, but she has her hands full trying to set up a new government in Germany. The election in Germany was inconclusive, and talks between Merkel’s conservative bloc and two smaller parties floundered. Merkel has started talks with the Social Democrats, but German coalition talks tend to move slowly, and could last for several more months. Macron’s grand plans for Europe will have to remain on the shelf until Merkel has a government in place.

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