Weak start in Europe as US data comes into focus

• French stocks roll over again ahead of weekend vote
• US core durable goods in view after yesterday’s new home sales decline
• Core PCE could give markets a boost

European markets have kicked off a somewhat indecisive start to the day, with the German DAX providing the one glimmer of light as the likes of the FTSE 100 and CAC head lower. While we saw early gains for French stocks, the fact that we are seeing them fade once again comes as no surprise as we approach the weekend election. Yesterday saw yet another poll that pointed towards further gains for the Far-Right National Rally party, with a Macron loss becoming increasingly likely. Nonetheless, while the Bloomberg poll of polls has NR and its allies at 36% of the vote, the fact that this remains well below the 50% marker highlights the fact that we will likely have to wait until next Sunday to find out the result. With that in mind, traders should expect a jittery period ahead, with the fears of a fresh surge in borrowing costs and financial instability driving potential CAC and euro weakness.

Today sees the US economy come into sharp focus, with the final GDP and core durable goods orders data released ahead of tomorrow’s crucial core PCE inflation release. Signs of weakness in the jobs market have started to spread through alternate areas of the economy, with yesterday’s new home sales figure falling to a 2024 low. While the Fed will be concerned that we are seeing tentative signs of distress across parts of the US economy, the question over at which point it influences to Fed to react remains key. With Powell noting that the FOMC will want to be confident that inflation is on a pathway back down towards 2%, the decline widely anticipated for tomorrow’s core PCE price index figure could yet help bolster support for a September rate cut.