CAC40: -1% to 7,220, slightly reduces loss after US PCE

(CercleFinance.com) - The Paris Bourse is wrapping up one of the worst weeks of balance sheet dressing since 2008, and is down -1% (to 7,220) for this "4 witches" session.


The weekly return was -2.5%, while the annual return (the end of the 2024 financial year for most managers) was -4.4%, representing a differential of -11% versus the Euro-Stoxx50 (+6.3% since January 1) and -33.5% versus the Nasdaq, the most phenomenal gap in history (post 70s).
The Parisian index, which in the space of a few days has broken through the psychological thresholds of 7,400 and 7,300 points, is heading for a second consecutive weekly decline, with a test of the 7,200Pts mark on the horizon.

It's been a turbulent week, with the less accommodating speech by Jerome Powell, Chairman of the US Federal Reserve, having shaken the markets by shaking their expectations regarding the timing of the institution's next rate cuts.
'Times are tough... And there's nothing to be optimistic about at the moment", lamented Christopher Dembik, investment strategy advisor at Pictet AM, at the start of the week.

With Moody's having recently decided to downgrade France's sovereign rating, observers expect the climate of political instability prevailing in France to persist into 2025.

The PMIs published at the start of the week have also fuelled concerns about growth in Europe, illustrated by the ECB's latest forecasts, which only forecast a 0.2% rise in eurozone GDP for the 4th quarter.

At the end of a week marked by renewed investor nervousness, Wall Street posted heavy losses for the week, with the Dow Jones giving up 3.4% since Monday.

But it was also a very bad week for the fixed-income markets: the yield on 10-year Treasuries climbed to 4.59% last night, reaching its highest level since the end of May, before easing to 4.525% (from 3.62% in mid-September), and the 30-year passed the 4.75% mark, compared with 4.000% on January 1, before falling back to 4.71% after the PCE.

In Europe, we also had a very bad week, with an average of +7Pts, but the scores are levelling off this Friday at 3.117% for our OATs and 2.3070% for Bunds (i.e. 81Pts spread) and 3.475% for Italian BTPs.

Inflation and the evolution of monetary policy on the other side of the Atlantic rebounded this afternoon with the publication of the PCE price index, the Fed's preferred measure of inflation: prices rose modestly by 0.1% in November, with the 'core' index scoring the same at +0.1%.
Over 12 months, the PCE rose by +2.4% (vs. +2.3%), but the market was fearing +2.5%, with the 'Core PCE' remaining unchanged at +2.8%.

Most traders are expecting another rate cut in March, after a pause in January, but any indicator suggesting persistent inflation would revive the scenario of a later date.

The question of the budget wall is also likely to come back to haunt investors' minds after the rejection of a text by the Republican-controlled House of Representatives.

Donald Trump had opposed this proposal on which both camps had agreed, which means that elected representatives have until midnight tonight to avoid a shutdown of the federal government.

In any case, trading is likely to be characterized by a certain volatility on this day of the "four witches", marked by the expiry of numerous index and equity derivatives and options contracts.

On the currency markets, the euro, under pressure this week after Jerome Powell's more restrictive comments, is trying to regain some ground against the dollar, appreciating by +0.3% around 1.03980.

Against this backdrop of nervousness on the financial markets, even the ounce of gold has fallen back to one-month lows, although the price of the yellow metal is rebounding by 0.4% to $2,618.8 this morning.

Crude oil prices are moving lower, with a barrel of US light crude falling back below the $70 mark, while Brent is heading back towards $72.5.

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