(News Bulletin 247) – The CAC 40 lost further ground at mid-session on Tuesday, as the market remains attentive to developments in the political situation in France and will follow the hearing of the chairman of the American Federal Reserve, Jerome Powell.

The Paris Stock Exchange is preparing to enter a second session in the red, without however collapsing. The CAC 40 dropped 1% at mid-session this Tuesday to 7,553.47 points.

“Stocks are down in Europe on Tuesday as investors await further clues regarding the outlook for monetary policy in Europe and the US this week, likely provided by this week’s batch of CPI (consumer price index, a measure of inflation) data,” said Pierre Veyret, technical analyst at Activtrades.

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S&P warning to France

The markets are obviously keeping an eye on the political situation in France after the legislative elections produced a National Assembly without an absolute majority.

The risk of political deadlock for an indefinite period remains present in the minds of investors and moreover, the CAC 40 underperforms the other major European indices. “The political landscape (…) maintains uncertainty in the region”, summarizes Pierre Veyret.

While S&P had already issued a warning on Monday, Moody’s has, in turn, warned France. The rating agency warned that the repeal of the pension reform and more generally a reduced willingness to make savings could have a negative impact on France’s rating.

The spread between France and Germany on 10-year bonds, a measure of market stress on French debt, is widening again slightly. This gap stands at 65 basis points (0.65 percentage points), compared to 62 basis points the day before.

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Dassault Systèmes and Verallia in the tough times

Investors will be watching the hearing of the chairman of the US Federal Reserve (Fed), Jerome Powell, at 4 p.m., before a Senate committee. The central banker will then appear before the House of Representatives on Wednesday.

“It will be interesting to see if he has any comments to make on the weakest data in recent times, including the highest unemployment rate (4.1%) since November 2021. Currently, investors are pricing in two rate cuts (by the Fed, editor’s note) by the December meeting, which is more than the single cut anticipated by the midpoint at the June meeting,” Deutsche Bank said.

On the value side, the session was marked by profit warnings. Airbus and Bic had already issued them in previous weeks.

This Tuesday, Dassault Systèmes dropped 4.8% after lowering its annual targets due to contract delays.

Verallia, for its part, plunged 14.7% as the company faces a slower-than-expected recovery, and reduced a key earnings target for 2024.

For its part, Carmat gained 2.4% after reporting encouraging activity for the first half of the year.

Exclusive Networks jumped 6.7% as the company confirmed it had received interest from a consortium of investors.

On other markets, the euro is stable against the dollar, at 1.0822 dollars. Oil is falling slightly. The September contract on North Sea Brent is down 0.4% at 85.39 dollars a barrel while the August contract on WTI listed in New York is down 0.5% at 81.92 dollars a barrel.