CAC40: W-Street/E-Stoxx50 gap widens, EU rates tense

(CercleFinance.com) - The Paris stock market is down 0.
8% (vs. +0.3% this morning), sinking below 7,200 in a cautious environment following the publication of the latest US inflation data, which showed a slight acceleration to +2.6%.
According to the Labor Department, the US CPI (consumer price index) rose by 0.2% in October 2024 compared with September.

Excluding energy (-4.9%) and food (+2.1%), two traditionally volatile categories, the underlying annual inflation rate came out at 3.3% last month, a level also in line with economists' forecasts (on a sequential basis, the CPI in 'core' data rose by 0.3%).
Wall Street did not react to this publication, and the 3 main US indices reopened higher for the 6th consecutive session... but as on Tuesday, the initial gains faded after the 1st half-hour and the red dominated, with token gaps ranging from -0.1% (S&P500) to -0.2% (Nasdaq), while the Dow Jones recovered 0.1%.

As a result, Wall Street continues to widen the gap with Europe (the E-Stoxx50 falls by -0.8% to 4,700 and breaks the 4,730 support level), which continues to fall, with gaps of -3 to -3.5% in 48 hours, compared with -0.2% for the S&P500.
While the pan-European index has now validated a clear break of the 4,800-point threshold (1st downside alert on Tuesday), the VSTOXX barometer measuring its volatility remains relatively contained, remaining below the 18-point level.

"This suggests that markets are not worried about growth prospects, but rather adapting to a new reality", say Danske Bank analysts.

Under these conditions, investors will be turning their attention to economic indicators in the coming days, to determine whether the current differential between Europe and the United States is actually justified.

The US interest-rate markets continue to trade close to their worst levels since the beginning of July: T-Bonds 2034 reached 4.435% on Tuesday evening, and are only easing by -2Pts to 4.415% (after +10Pts the previous day).

The scenario of a 25-basis-point rate cut in December is becoming a hypothesis that receives less than 50% of traders' votes, according to CME's FedWatch tool.

Investors know that a strong economy - accompanied by a resurgence in inflation - would force the Fed to make fewer rate cuts than expected just before the presidential election.

Meanwhile, in the third quarter of 2024, the number of unemployed in France (excluding Mayotte) as defined by the International Labour Office (ILO) rose by 35.000 on the previous quarter, to reach 2.3 million people, according to Insee.

On the European bond front, the Bund fell by +3Pts to 2.363%, our OATs by +1.5Pt to 3.146%.

In news from French companies, Interparfums expects sales to reach €910 to €930 million and operating margin to exceed 19% again in 2025, a year which 'will also mark the creation of its own Solférino brand'.

On Wednesday, Thales announced the renewal of its maintenance and repair contract with Eastern Airlines Technic (EASTEC), the overhaul subsidiary of Chinese airline China Eastern.

Finally, Medidata, the life sciences subsidiary of Dassault Systèmes, announced on Tuesday evening that it had sealed a new agreement with Bioforum, a research organization dedicated to clinical trials.

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