CAC40: quiet session in the absence of indicators

(CercleFinance.com) - The Paris Bourse opened on a weak note on Wednesday morning, following solid gains the previous day, on the eve of what promises to be a quiet session in the absence of major indicators.
The CAC 40 index lost 0.5% at around 7560 points.

With yesterday's 1.3% rise, the Paris market proved to be the main beneficiary of the Chinese stimulus package, which boosted the luxury goods sector, enabling it to climb back above the 7600-point threshold in high volumes.

This solid performance suggests that the consolidation expected after the rebound that began in September may not be imminent, and that the Paris stock market will continue to gain momentum.

China's monetary stimulus has obviously triggered a wave of optimism on the stock market, given that it echoes a larger-than-expected rate cut by the US Federal Reserve last week", explains Christopher Dembik, Investment Strategy Advisor at Pictet AM.

"But this wave of optimism could quickly lead to profit-taking and a brutal return to reality", warns the analyst.

Opinions differ as to the future direction of the equity markets, with some professionals betting on a climate favorable to risky assets thanks to the monetary easing underway, while others warn of a risk of stock market relapse.

"It remains to be seen whether the rate cut will stimulate economic growth, which is a key driver of earnings", asks César Perez Ruiz, Head of Investments at Pictet Wealth Management.

Perez Ruiz is mainly concerned about the increasing number of earnings warnings in recent weeks and the continuing geopolitical tensions.

"We therefore see limited upside potential for equities, and are aiming to shift cash into bonds", says César Perez Ruiz.

Although the markets are beginning to show signs of fatigue, they are holding up rather well for the time being, as illustrated by the new records set by Wall Street yesterday.

Also buoyed by support measures in China, the Dow Jones index posted a minimal 0.2% rise, but enough to allow it to set new record highs, while the Nasdaq gained 0.6% thanks to the rebound of Nvidia (+5%).

While Wednesday's session is expected to be calm, in the absence of any indicators or events likely to cause the indices to react, investors are likely to be reluctant to take any clear-cut positions ahead of the important dates over the next few days.

On Friday, investors will be keeping a close eye on the publication of the US Consumer Price Index (CPI), the Fed's preferred gauge of inflation.

Despite the rally in equities in Europe and New York, the government bond market remains unstable, continuing its trend of the past week.

After another batch of disappointing economic indicators, the yield on the German ten-year Bund fell back slightly towards 2.14%, while its French equivalent eased towards 2.91%.

The yield on US ten-year Treasury notes followed suit, stabilizing at around 3.73%.

Oil prices are trading at one-month highs, buoyed by optimism about China's economic recovery and renewed geopolitical tension following Israeli strikes in Lebanon against the Iranian-backed Hezbollah.

This morning, Brent crude lost less than 0.2% to $75.10 a barrel, while US light crude (West Texas Intermediate, WTI) dropped a more significant 0.5% to $71.2.

Buoyed by the falling dollar and geopolitical tensions, the price of an ounce of gold set record after record, gaining a further 0.1% to $2,679.7 an ounce this morning. For the year as a whole, this represents an increase of 43%.

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