CAC40: between euphoria and pre-'3 witches' tactical buying

(CercleFinance.com) - The Paris Bourse set off on an algorithmic upward funicular in early trading, with the CAC40 rising from 7,508 (+0.
25%) to 7,620Pts (+1.7%) after Christine Lagarde's press conference.
The euphoria eased a little at 1/2 of the close, but the CAC40 still gained +1.2% to 7,580Pts.
Such a rise remains a "classic" on the eve of the "3 Witches" session, which will conclude a 9th week of gains out of 10 (including 6 in a row), a 6th month of consecutive gains (and an 11th out of 12).

It was bullish fireworks at the start of the session on Wall Street: the Dow Jones index (+0.3%) registered a new all-time high at 43,288 points.288 points, the S&P500 at 5,881 (+0.2% now) and the Nasdaq closing in on 18,500Pts.
With such a stubbornly bullish underlying trend, ending the month of October at the zenith is anything but a surprise...
The Euro-Stoxx50 today remains well behind the CAC with +0.8% at most (around 4.965), but that's enough to post almost +3% on the October maturity.

As expected, the European Central Bank (ECB) has finally aligned its strategy with market expectations by cutting rates again (-25pts to 3.25% on the 'Repo').
At her press conference, Christine Lagarde - speaking from the Slovenian capital - was cautious about the timing of future rate cuts (the ECB remains 'data dependent'), but did hint at 'signs of a slowdown' in activity.
As it happens, the ECB has always given priority to inflation ('on the right track' with +1.7% confirmed in the Eurozone), and markets expect it to make growth its priority... and a 'semantic' step in this direction seems to have been taken (synonymous with further stimulus measures).

Christopher Dembik of Pictet points out: "The slow pace at which the cost of money is falling in the eurozone is a problem for companies, especially small and medium-sized ones, which are faced with far from favorable financing conditions in a context of shrinking margins and falling demand.
Recent indicators, in particular the latest PMI indices, have highlighted the slowdown in the European economy, accentuated by Germany's current difficulties.

The latest consumer price figures confirm that inflation is back below the ECB's 2% target, at 1.7% in September 2024, compared with 2.2% in August, according to Eurostat, which has revised downwards by 0.1 points its flash estimate for last month published on October 1.

The US session will be enlivened by a number of statistics: US retail sales rose by 0.4% sequentially in September, according to the Commerce Department (after +0.1% in August), and by +0.5% excluding vehicles and equipment.

On a quarter-on-quarter basis, US retail sales rose by 1.3% over the third quarter as a whole, including a 1.1% increase excluding the automotive sector.

US industrial production, on the other hand, fell by -0.3%, symmetrically to August's +0.3% (revised from +0.8%).

The Fed, which publishes these figures, explains that the strike at 'a major civil aircraft manufacturer' (i.e. Boeing) reduced industrial production by around 0.3% in September, and that the effects of two hurricanes also subtracted around 0.3%.

Also according to the Federal Reserve, the capacity utilization rate in US industry deteriorated by 0.3 points to 77.5% in September, a level 2.2 points below its long-term average (1972-2023).

After rising for two weeks, weekly jobless claims fell again last week in the USA, a further sign of the resilience of the US labor market.

Manufacturing activity in the Philadelphia region advanced much more than expected according to the local Fed survey, with the Philly Fed diffusion index of general current activity rising from 1.7 in September to 10.3 in October, its second consecutive increase.

Survey indicators for new orders and shipments also rose, returning to positive territory this month, while the employment index fell, suggesting stable employment conditions.

Both price indices fell slightly, but continue to point to overall price rises. Growth expectations over the next six months were more widespread this month, with most future indicators rising.

Following Lagarde's press conference, benchmark bond yields in the eurozone tended to rebound: +3.5pts for the German 10-year Bund to 2.2100%, +3.4 to 2.943% for the French OAT of the same maturity.
In the US, the 10-year yield jumped +8pts to 4.09%, returning to its worst levels since early August.

On the foreign exchange market, the euro fell by -0.4% to $1.0820, or -1.5% on the week.
Oil rallied slightly ahead of the afternoon announcement of US oil inventories, and despite signs of a tentative lull in the Middle East.

Brent crude (+0.2%) is trading not far from $74.5 a barrel and US light crude (+0.3%) around $70.7.

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