CAC40: the '4 Witches' weigh heavily on the market, while interest rates rise sharply

(CercleFinance.com) - The Paris Bourse is down from -1% to -1.
2% on this Friday of the "4 Witches" (weekly total of +0.8%): Thursday's euphoria has evaporated, but this should not prevent the CAC40 from completing a second consecutive week of gains.
Paradoxically, the optimistic mood on interest rates is not at all shared by the bond markets, with yields tightening -significantly- for the 3rd consecutive session.

US T-Bonds are down +5pts to 3.755% (+11pts in 3 days), our OATs are up +2.5pts to 2.95600% (+14pts in 4 sessions), and Bunds are up +2pts to 2.211% (+9pts in 4 sessions).

No 'stat' has come to explain the tension in rates over the past 3 days, and the paradox could be resolved by the return of 'risk-on', which is being exerted to the detriment of assets protecting against 'risk'.

This would justify the enthusiastic comments made the previous day, after one of the strongest overall rises on the stock markets of developed countries (Japan, Europe, Wall Street): "Reassured by the action of the US Federal Reserve, the Paris market soared by 2.3% yesterday to regain the 7,600-point threshold, which it had sunk to at the beginning of the month".

The markets are benefiting from the change in monetary policy by both the Fed and the ECB, with investors increasingly likely to see new initiatives to support growth.

'We are obviously only at the very beginning of the rate-cutting cycle, but so far we seem to be in a positive scenario in which the Fed cuts rates without a recession materializing', say Deutsche Bank analysts.

From a historical point of view, this conjunction has proved very favorable for equities", reminds the German bank.

On Wall Street too, the Fed's infectious optimism about a "soft landing" for US growth drove New York indices to new record highs last night.

The Dow Jones, S&P-500 and Nasdaq held back slightly (-0.2% on average), while the Nasdaq-100, which had surged by 2.5%, gave up just 0.1%.

US technology stocks, which are expected to benefit from rate cuts that encourage investment in digital technology, were among the main beneficiaries of the general euphoria on Thursday (the SOXX soared by +4.25%).

In terms of economic indicators, the latest figures were also pleasing, confirming the Fed's current version of the "goldilocks" (growth neither too strong nor too weak).

No "figures" today, but a meeting with the BoJ went well (unlike last August 1): the Bank of Japan (BoJ) decided to keep interest rates unchanged, while declaring itself satisfied with the economy's recent evolution.
A new spike in volatility has been avoided ('carry-trade crash' 6 weeks ago).
On the currency front, the YEN is down -1% to $144/, which explains the slight +0.2% gain in the '$-Index'.
The Euro remains virtually stable at $1.1155, while the ounce of gold breaks a new record at $2.615/Oz.


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