(News Bulletin 247) – The Paris Stock Exchange has given a lukewarm reception to the latest inflation figures, several of which contradict the scenario of a more pronounced rate cut by the Fed next week. The CAC 40 fell back below 7,400 points on Wednesday evening.

Today’s statistics have led the market to question the future intentions of the US Federal Reserve (Fed), a week before its monetary meeting. And the latest inflation figures do not necessarily go in the direction of the markets since they distance the prospect of a more pronounced rate cut by the Fed.

The CAC 40 took note of this, and fell 0.14% to 7,396.83 points after having been in the green until the opening of the American markets.

A mixed report on inflation

The consumer price index posted its weakest increase since February 2021, at 2.5% year-on-year in August in the United States, which is slightly below the 2.6% expected by economists and marks a deceleration from 2.9% in July.

But several components of these inflation figures tarnish this encouraging publication. The disappointment of this report comes from inflation excluding energy and food prices (the “core CPI”), which is stable at +3.2% year-on-year, notes Bastien Drut, head of strategy and economic studies at CPRAM.

“The bulk of the bad surprise comes from the ‘housing excluding energy’ component, which is reaccelerating in monthly variation. This development is doubly surprising because this component was rather slowing down in recent months and the monthly variation in rents is falling… while that of the equivalent rents for owners is rising sharply. Such a gap is historically rare…”, continues the market specialist.

“A week before the Fed’s monetary policy committee, this rather disappointing inflation report is necessarily bad news for the members of the FOMC (the Fed’s monetary policy committee). This will test the new direction set out by Jerome Powell, with the focus on the labor market rather than on inflation,” adds Bastien Drut.

These figures give credence to a cut in the Fed’s key rates of 25 basis points (0.25 percentage points), with the market currently assessing the probability of such a scenario at 85% against 66% the day before, according to the CME FedWatch tool.

“Market sentiment was also influenced by uncertainty surrounding the US elections, which is expected to create some volatility in the market due to a lack of clarity on key policy issues,” notes Erik Boekel of DHF Capital.

Will Axa break a “taboo”?

On the stock side, Axa gained 0.5% while Bank of America reiterated its buy rating, judging that the stock deserves an appreciation of its stock multiples. It believes that the stock should be able to break the ceiling of a price above 10 times expected earnings per share (“it should not be a taboo”).

Outside the CAC 40, the prepaid service voucher specialist Pluxee dropped 8%, penalized by JPMorgan which lowered its advice from “outperformance” to “neutral”.

Ubisoft drinks the chalice to the dregs, and loses another 9.4% this Wednesday evening. The video game publisher’s stock this time suffered from a drop in opinion and the poor performance of Star Wars Outlaws, the latest title launched by the video game publisher.

In other markets, the euro is down slightly by 0.1% at $1.1013. Oil is recovering after falling to a December 2021 low on Tuesday. Black gold prices are supported by data on the decline in US stocks.

The November contract on North Sea Brent crude rose 1.5% to $70.23 a barrel, while the October contract on WTI gained 2% to $67.06 a barrel.