CAC40: -0.5%, with W-Street downturn, despite strong rate easing

(CercleFinance.com) - The Paris stock market is back in the red after spending almost 2 hours in positive territory.

The CAC40 (-0.6% to 7,590) is penalized in particular by Renault (-3.3%) and the luxury goods sector (Kering, L'Oréal, Hermès and LVMH at -2.5/-3%).

The CAC40 peaked at 7,654 (+0.2%) before being taken by surprise by a more negative-than-expected opening on Wall Street.

Within a quarter of an hour, declines ranged from -0.7% for the Dow Jones, -0.8% for the S&P500 and -1.1 to -1.2% for the Nasdaq.
A drop that investors in the Eurozone had not seen coming, because there's nothing obvious about it.... unless they are concerned - at last - about the geopolitical context and the risk of a conflagration in the Middle East, which nobody believed in until yesterday, before hundreds of Israeli tanks entered Lebanon on Monday evening at around 8 p.m. (an unprecedented offensive since 2006), for a "limited operation" in scope and time... which in 90% of cases will end in a large-scale conflict with no resolution in sight.

The link with the cautious comments made by Federal Reserve Chairman Jerome Powell is not obvious, since the US indices had not reacted to them by Monday evening.
The Fed boss said that monetary policy in the USA would evolve 'over time', with no pre-established direction, and that decisions would be taken 'meeting by meeting'.

From a 'macro' point of view, and in contrast to 'geopolitics', the news is rather reassuring: this morning, investors took note of the HCOB PMI index for the French manufacturing industry, produced by S&P Global. It came in at 44.6 in September, up on August (43.9), but still below the unchanged 50 mark.

On the other hand, the HCOB PMI index for eurozone manufacturing, produced by S&P Global, fell from 45.8 in August to 45 in September, its lowest level of 2024, signalling a further deterioration in the sector's economic situation.

The first inflation estimate for the region in September confirmed the easing of inflationary pressures, with a score of 1.8%, below the ECB's 2% target, with core inflation falling back to 2.7%.

Indicators such as these - pointing to a contraction in activity and a slowdown in consumer prices - should bolster the scenario of a further ECB rate cut on October 17.

Despite the tense situation in the Middle East, a barrel of crude oil fell by 1.4% in London, to 70.7 euros.
On the bond front, the 10-year Bund fell by -11.3pts to 2.02%, our OATs by -13pts to 2.79%, while T-Bonds of the same maturity erased -9pts to 3.72%.

The dollar advanced slightly against the euro, which returned to trade around $1.11/E.

In French company news, LVMH announces the sale of Off-White, the international luxury streetwear brand founded in 2012 by Virgil Abloh, to the New York-based brand management company Bluestar Alliance, a transaction whose terms are not disclosed.

JCDecaux announces that JCDecaux Top Media, of which it is the majority shareholder, has acquired 70% of IMC, one of the leading outdoor advertising companies in Central America and number one in Costa Rica, from its founders.

Veolia announces that it will build a new heating network in London that will supply heat from the SELCHP waste-to-energy plant (WTEP), in partnership with Southwark Council.

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