The Paris Bourse is set to open very slightly higher on Monday morning, with investors reluctant to take a position less than a week ahead of the first round of parliamentary elections.

At around 8:15 a.m., the future contract on the CAC 40 index - which has now switched to July maturity - advanced 14 points to 7661.5, pointing to a modest rise at the opening.

Over the past week, the star index had posted a gain of almost 1.7%, but this was not enough to make up for its decline of over 6% the previous week.

The Paris market's timid rebound will be put to the test this week by a series of important events, not only on the economic front, but also on the political front.

Investors may be risk-averse ahead of Sunday's first round of parliamentary elections, the outcome of which will determine the country's future.

For the time being, foreign investors are taking a wait-and-see attitude, but they are beginning to envisage two worst-case scenarios: a grand coalition in which LFI would have significant economic clout, or the absence of an absolute majority for the RN, which could lead to the resignation of the President of the Republic", stresses Christopher Dembik, investment strategy advisor at Pictet AM.

All this is obviously very hypothetical", the market analyst moderates, however.

"Let's not forget that France is planning to borrow massively on the markets in July. We're going to have to reassure quickly", he warns.

An Ipsos poll currently gives the Rassemblement National and its allies around 35.5% of voting intentions, followed by the Nouveau Front Populaire in second place with 29.5% of the vote.

"We believe that European share prices are incorporating an appropriate risk premium while awaiting the results of the French elections", judge the strategists at UBS.

The spread between the French 10-year bond and the German Bund of the same maturity - currently 80 basis points - has been closely watched for the past two weeks and will continue to be closely monitored until Sunday.

Investors could also be cautious just a few days before the first debate between Joe Biden and Donald Trump, scheduled for Thursday, in the run-up to the US presidential election in November.

The markets are also likely to remain plagued by uncertainties concerning the pace of inflation across the Atlantic.

Against this backdrop, market participants will be keeping a close eye on Friday's publication of the 'PCE' inflation index, which is particularly closely watched by the Fed.

After coming in at 2.7% in April, this indicator is expected to fall to 2.6% in May on a year-on-year basis, confirming the disinflationary trend that has been taking shape over the past few months.

Weaker-than-expected inflation figures in April had reactivated the scenario of a rate cut in September.

While the fact that the PCE continues to weaken, albeit slowly, and is approaching the Fed's 2% target, removes the possibility of a return to Fed rate hikes, it does not yet validate the scenario of more rate cuts.

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