The Paris stock exchange has now notched up its 12th consecutive session of low volatility, slipping 0.37% to around 8,023 points. Technically, the situation is deteriorating, as the benchmark index has now broken below the 8,050/8,150 corridor.
On Wall Street, it's another day of stalemate: the Nasdaq is down 0.1%, the S&P 500 remains flat at 6,840, and the Dow Jones is up 0.5% (after losing 0.5% the previous day).
The S&P 500 has been completely stuck between 6,800 and 6,880 since November 26—fifteen days of total stagnation—as the market remains frozen by uncertainty over the message the US Federal Reserve is set to deliver.
According to analysts, this extended pause doesn't necessarily signal a loss of upward momentum. Instead, it's seen as logical profit-taking after a rapid rally, led by the technology, consumer, and semiconductor sectors, that propelled Wall Street to record highs this autumn.
"Market conditions on the eve of an FOMC meeting are never particularly lively," notes Michael Brown, strategist at Pepperstone.
"Those preceding the December meeting, when everyone is starting to prepare for the year-end holidays, are even quieter," he adds.
While a third Fed rate cut in three months is not in doubt, the key question is whether the Fed will confirm the continuation of its monetary easing cycle as early as 2026.
The US central bank's statement, due at 8:00pm, will be accompanied by its latest economic projections and followed by a press conference from its chairman, Jerome Powell.
Given the persistent divisions within the Fed's board in recent months, investors are expecting a "restrictive" rate cut—one motivated more by caution in light of the recent deterioration in the labor market than by any need to support US economic growth, which remains robust.
Many observers expect Powell to temper expectations for further rapid rate cuts next year, in contrast to the three consecutive easings since September.
While tonight's expected rate cut could be the last for a while, it's likely Powell will seek to avoid destabilizing financial markets. His remarks are expected to be measured and reassuring, aiming to preserve investor confidence after a highly successful year for equities.
"If the Fed sends a more dovish signal than anticipated, the market could quickly regain momentum and retest its historic highs," notes Linh Tran, market analyst at XS.com.
"Conversely, if his tone is too cautious, the S&P 500 risks continuing its gentle consolidation, awaiting fresh catalysts," she warns.
One sign to watch: bond markets have been deteriorating—and quite sharply—since late November. No rally has lasted more than a few hours. This morning, the yield on 10-year T-Bonds hit 4.51% before pulling back to 4.17% (-2 basis points), while the 2-year yield is now oscillating between 3.625% and 3.605% (-0.8 basis points).
In Europe, French OATs are up 1.1 points to 3.5780%, German Bunds up 1 point to 2.8620%, and Italian BTPs up 1.2 points to 3.565%.
The euro is edging up 0.15% to 1.1645, while Bitcoin is down 1% to $91,900.
On the energy front, oil is returning to its recent lows, with Brent down 1.1% to $61.40 and WTI down 1.2% to $57.65 on the NYMEX.
