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The Paris stock market began the week on firmer ground, breaking from a rough stretch with a 0.76% rise in the CAC 40 index. Investors shifted their focus after new signals from the US fueled bets on a possible Federal Reserve rate cut in September. Market odds now place a 25-basis-point cut at over 80%, a sharp rise from the earlier 38%, following disappointing US employment figures.
The reaction in Paris marked a quick recovery from the previous week's dip of nearly 3%. Despite slower earnings in the CAC 40, with quarterly profits sliding by 28%, investors looked beyond near-term concerns. A weaker dollar further lifted European stocks. It dropped against currencies like the euro, yen, and Canadian dollar, increasing confidence in foreign equities.
As traders began pricing in looser monetary policy, appetite for risk returned. Hopes for a smoother policy path from the Fed gave new momentum to the broader European market. The expectation of cheaper borrowing costs created a better environment for equities, especially during times of global volatility.
At the same time, France's 10-year bond yield remained stable at 3.35%. This reassured the markets despite challenges like a stronger euro and ongoing US tariffs. Export-focused sectors continue to feel the strain, but for now, sentiment has shifted toward cautious optimism.
While the rally in Paris remained moderate, its underlying message was clear. The growing belief in Fed intervention to counter economic cooling in the US has started reshaping global market sentiment. With rate-cut expectations rising, the focus turns to whether the Fed will confirm these assumptions at its September meeting.
The US labor market has become the key signal. A softer employment report drove much of the current speculation. Investors expect this data to prompt the Fed to act, aiming to support growth amid tightening financial conditions. Any confirmation of policy change may send shockwaves through global markets, especially those tied closely to US trade and currency fluctuations.
Despite weaker corporate results, the Paris market is showing signs of resilience. Much of this depends on how the Fed balances rate policy with long-term inflation and economic indicators. Alongside this, trade talks between the US and EU will add another layer of uncertainty or opportunity.
For now, the rebound in Paris signals that investors are ready to lean on central banks once again. Optimism around a Fed rate cut has injected new life into Paris stocks, helped by dollar weakness and a refreshed view on European markets. As key meetings approach, the direction remains tied to a few critical signals, but for today, the bounce reflects hope.
Also Read – Asian Stock Rally Stalls Amid Fed Rate Cut Uncertainty, UK Retail Rebounds
