The CAC index has steadied on Wednesday, after recording five consecutive losing days. Currently, the CAC is at 5423, up 0.01% on the day. On the release front, key French indicators disappointed. Consumer Spending declined 1.5%, well off the estimate of 0.2%. Preliminary GDP dropped to 0.2%, shy of the estimate of 0.3%. In the US, the key event is Preliminary GDP, with an estimate of 2.3%. On Thursday, inflation indicators will be in focus, as France and the eurozone release CPI reports.
Is the bleeding over? The CAC index has hit some strong headwinds, declining 3.6% since May 23. Investors have reacted negatively to the continuing political turmoil in Italy, the Eurozone’s fourth-largest economy. The drama started when President Sergio Mattarella shocked the political establishment, rejecting the choice for finance minister of the two parties which were expected to form a coalition, the League Nord and the Five Star Movement. Mattarella said he could not support the nomination of a finance minister who was in favor of Italy leaving the eurozone. The prime minister-elect, Giuseppe Conte, then announced that he had withdrawn his mandate to form a government, and Mattarella invited Carlo Cottarelli, a former IMF economist, to form a temporary technocrat government. However, there are reports that the League and Five Start Movement could get another kick at the can to form a government. Another possibility is that Italy will hold a snap election. It’s doubtful if another election would change the political landscape, so Matterella will likely huddle with political leaders and seek a compromise in order to avoid another general election.
Investors are also keeping a close eye on the on-again off-again summit between the U.S and North Korean leaders. President Trump and North Korean leader Kim Jong-un are scheduled to meet in Singapore on June 12, but curiously, neither side will confirm whether the meeting is on. Last week, Trump sent a letter to Kim, saying that Trump was canceling the much-anticipated meeting. However, the White House has since sent a team to Singapore and a senior North Korean official is on his way to Washington to meet with Secretary of State Mike Pompeo. If there is confirmation that the meeting is on, traders can expect global stock markets to gain ground.