CAC40: Red lantern in Europe, ignores rate easing

(CercleFinance.com) - The Paris Bourse is sinking deeper into the red, and the opening of Wall Street this time does nothing to change this: the CAC40 is down -0.
9% at 7,533, despite the new records set the previous day by the S&P and the Dow Jones.
The Euro-Stoxx50 held up much better (the CAC is the red lantern today) with just -0.4%, while the DAX40 smashed a new all-time high above 19,630 and seems to be heading straight for 20,000 on Friday October 18 (the '3 Witches' session).

Wall Street reopened indecisive (Nasdaq and S&P500 unchanged, D-Jones down -0.4%), while welcoming the accounts of American giants Bank of America (+2%) and Johnson & Johnson (+1%). On the other hand, Citigroup dropped -1.8% with a -9% fall in earnings and a symmetrical rise in provisions for bad debts.

A major salvo of earnings releases is expected this week, as 43 S&P 500 companies, including six Dow Jones companies, will publish their accounts, among them Netflix, American Express and Procter & Gamble.

Investors are looking for pleasant surprises to reassure them of the current high valuations, in the hope of revising upwards their earnings forecasts for major US companies.

'In addition to the usual financial metrics, we'll be paying particular attention to announcements concerning share buybacks', explains Christopher Dembik, Investment Strategy Advisor at Pictet AM.

Over the past few months, this has been a massive support for equities", the analyst recalls.

"This generally leads to inflation in financial assets", explains the professional.

"Structurally, everything points to a continued rise in equities worldwide, particularly US equities", stresses Christopher Dembik.

On the figures front, manufacturing activity contracted sharply in New York State in October.

The 'Empire State' index of general conditions calculated by the local Fed fell by 23 points this month to -11.9.
This figure reinforces the easing of rates which began this morning: T-Bonds 2034 erased -7Pts to 4.054%.... but the '2-year' remains unchanged at 3.941%.

In Europe, the Bund eases by -4pts to 2.233%, our OATs by -6.8pts to 2.9700%, and the 'Bonos' by -5pts to 2.9500%.

In Europe, too, the macroeconomic agenda was busy, with the ZEW index of German investor sentiment and eurozone industrial production figures published in the morning.

German investor sentiment deteriorated further in October, according to the ZEW economic research institute, but their outlook is tending to improve, offering a small glimmer of hope for Europe's ailing leading economy.

The ZEW index measuring the sentiment of analysts and market participants rose from 3.6 to 13.1, an improvement of 9.5 points month-on-month.

In August 2024, compared with the previous month, seasonally-adjusted industrial production rebounded by 1.8% in the Eurozone and 1.3% in the EU, after declining by 0.5% and 0.3% respectively in July.

Buoyed by the strength of technology stocks, the Tokyo Stock Exchange recovered more than 1.1% on Tuesday, taking it back above the 40.000 and posted a gain of almost 25% over the past 12 months.

On the oil market, Brent crude suffered heavy profit-taking (-1.2% to $74.3/barrel after -4% the previous day) as OPEC again lowered its demand forecast for 2024 and 2025.

U.S. light crude (West Texas Intermediate, WTI) is down -5% in 24 hours, at around $70.6 a barrel.
Finally, the euro remains unchanged at around $1.0900/$.

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