The CAC is trading at 4382, down 0.5% on the session after the Paris government revealed a wider-than-expected budget deficit in May; this is in stark contrast to the Germany’s surprisingly better budget surplus.
The gap between Germany and France is widening, and my view is that Germany has a bigger influence in the European Central Bank monetary policy than France. Therefore, while the German economy is healthy, there will be little call to ease monetary policy anytime soon.
Only 13 of the 40 stocks that make up the CAC are trading above their 50-day moving average, a significant shift as there were 24 on Friday. BNP Paribas is one of the biggest fallers today and, as I previously stated, is a large component of the French index.
Tomorrow the Federal Reserve will release its minutes at 7pm (London time). Despite the jobs report from the US last week, I expect a dovish update that could help the France 40 pull back some of the ground it has lost.
The 200-DMA of 4355 is providing support, and if the Fed is still committed to loose monetary policy the CAC could target 4440.