CAC40: strong rally on eve of '4 Witches' festival

(CercleFinance.com) - A euphoric session on the eve of the '4 Witches', with one of the biggest overall index rises (Japan, Taiwan, Hong Kong, then Europe and Wall Street) for the year 2024.


Investors, who seemed perplexed last night after Jerome Powell's press conference (US indices down slightly), had a sudden change of heart last night, with buyers flocking to luxury goods (Hermès +4%), industrial stocks (Arcelor +4%, Saint Gobain +3.9%) and tech.
The Paris Bourse soars +2.1%, with the CAC40 back above 7,600, erasing its last losses since the previous edition of the '4 Witches'.

The Euro-Stoxx50 jumps +2% to 4,935 (it closes the '4 Witches').935 (closing the 4,915 gap opened on September 3) in the wake of ASML (+4.2%) Prosus (+4.5%), while Frankfurt (+1.5%) set a new all-time record at 19,045Pts (18,970 now, still in contention for a record close).
Over the quarter, the Euro-Stoxx returned to positive territory since mid-June, while the DAX gained +5.5% (+14% since January 1), despite the fact that the German economy is in recession and will remain so in the 3rd and 4th quarters of 2024, according to the 'Buba'.

On Wall Street, after a clearly gloomy end to the session on Wednesday evening, the psychology seems to have completely turned around in the space of a few hours: the Dow Jones (+1% at 42.000 and an intraday record at 42,100), an S&P500 at 5,715 (+1.7%)... and the Nasdaq-100 posting an outright +2.5% at 19,820 (with Tesla +5.3%, AMD +5.2%, Microchip +3.3%, etc.).
This is certainly not a record for the Nasdaq, but it is the 3rd biggest rise of the year after those of August 15 and February 22 (the zenith of August 21 is retraced) and the 19.700 on June 21 (ex-'4 Witches'), so the quarter was 'positive'.

Only the FT-100 (London Stock Exchange) failed to join in the bullish fireworks, with a gain of just +0.6% as the BoE left rates unchanged as expected.
The US Federal Reserve decided - almost unanimously - to cut its main key rate by 50 basis points, to between 4.75% and 5%, while hinting at further cuts this year.%.

If the dot plots are to be believed, monetary policymakers are forecasting 2 further rate cuts of up to 50 basis points in total between now and the end of the year, ruling out further rate cuts of the same magnitude as yesterday's, and continuing at a rate of -25 basis points per quarter in 2025 (ending up at 3.25/3.50%).

The Fed also made few changes to its forecasts for US gross domestic product (GDP) growth, which point to an increase in activity of 2% for 2024, continuing through to 2027.

In its press release, the Fed welcomed the progress made in controlling inflation, but also expressed concern that the economic outlook was "uncertain".

The long-term question is how the market will interpret this first drop", says Christopher Dembik, Investment Strategy Advisor at Pictet AM

. "Will it be satisfied to see its expectations realized, or will it interpret this unprecedented drop as a signal that the Fed is panicking about the state of the economy?

Many analysts point out that the Fed's announcements were largely incorporated into stock prices, and that it is now the evolution of the economy, and the risks of recession, that will dictate the trend on the markets.

As for the figures, optimists on Wall Street have reason to rejoice: manufacturing activity in the Philadelphia region rebounded more than expected in September, according to the local Fed, with its index of general current activity rising from -7 in August to +1.7 this month.

Among the survey's components, the new orders and shipments indices fall and turn negative, while the employment index rises and suggests overall employment increases.

Both price indices rise and continue to point to overall price increases.
Businesses in the region continue to expect growth over the next six months, with expectations more widespread this month.

Weekly jobless claims fell by -12,000 to 219,000 from a revised 231,000 the previous week, the Labor Department announced on Thursday... proof that the labor market remains robust.
The index of leading indicators, which is supposed to forecast the evolution of the US economy in the coming months, fell slightly for the sixth consecutive month in August, announced the Conference Board on Thursday, which sees this as a sign of a slowdown in activity.

The leading index fell by 0.2% last month, to 100.2, following a 0.6% decline in July, according to a confirmed figure.

In Germany, the Bundesbank expects a further contraction in growth in Q3 2024 (the recessionary climate is taking hold).
Sales of electric vehicles collapsed by -44% in Europe over 1 year in August, and by -70% in Germany, with just 27,000 units sold.

The dollar and Treasuries yields deteriorated - quite sharply - in the wake of the Federal Reserve's monetary policy announcements: the US 10-year climbed +5.5pts to 3.74% (vs. 3.64% yesterday morning), while the 30-year tightened +6.2pts to 4.0700% (vs. 3.94% yesterday).

There was little movement in Europe, with the Bund at 2.1900% vs. 2.1920%, our OATs tightened by +1.5Pts to 2.932% (74Pts spread with the Bund), while Italian BTPs improved to 3.553 vs. 3.576%.

On the foreign exchange market, the dollar is down -0.1% and the euro is down from 1.1160 to 1.1125 (same parity as before the Fed's monetary policy statement).
Oil is up +2% to $74.3 a barrel in London, as markets want to believe that the Fed was right to insist on the resilience of US growth and consumption.

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