Originally published at: This week in charts: A snapshot of the French economy – InvestEngine Insights
French stocks underperforming
French stocks fell this week, as investors grew increasingly concerned about a draft budget proposed by Prime Minister Michel Barnier.
Barnier hopes to pass a budget, which includes €60bn of spending cuts and tax increases, despite his lack of a working majority in parliament. To do this, he will bypass lawmakers using a special constitutional tool, risking a no-confidence vote that could topple his government.
It’s not only their stock market which is suffering. French sovereign bonds are also in the midst of a brutal selloff, with the yield on the French 10-year government bond now on par with Greece’s 10-year equivalent, the country at the heart of the sovereign debt crisis more than a decade ago.
US inflation remains above 2% target
In the US, the personal consumption expenditures (PCE) price index, a broad measure the Fed prefers as its inflation gauge, increased 0.2% on the month and showed a 12-month inflation rate of 2.3%. Both were in line with the consensus forecast, though the annual rate was higher than the 2.1% level in September.
Core inflation, which excludes the more volatile food and energy components, were higher, increasing at 0.3% on a monthly basis and 2.8% year-on-year.
The Federal Reserve maintains a 2% target inflation level, and with prices remaining stubbornly sticky at above 2% for all of 2024 so far, this will prompt the central bank to reevaluate the speed of their rate cutting cycle. As a result of the higher inflation levels, combined with Trump’s policies being generally viewed as inflationary, the market is now pricing in only about 0.70% of rate cuts in 2025, down from almost 2% of cuts for 2025 which were expected in September.
ATH tracker
The US market, buoyed by Trump’s election victory and a strong earnings season, continues to power ahead, reaching its 52nd all-time high of the year this week, as at the time of writing on Friday morning (the S&P looks set to reach number 53 at the close on Friday).
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