CAC40: climbs back towards 7200, despite rates at their zenith and $ at 1.057

(CercleFinance.com) - Wall Street's resilience in the face of CPI and rising interest rates has enabled the CAC40 to cut its losses a little with 30 minutes to go.

After falling below 7,160 around 4:30 pm (almost 1% down), the CAC40 is back up to 7,200 (-0.3%) in anemic volumes (1.6 billion euros traded), which show no real bearish pressure.

US indices are more than resisting the release of the latest US inflation data, which show a slight acceleration to +2.6% y/y.
The Dow Jones is up +0.3%, the S&P500 is back in the green (symbolically for now) and the Nasdaq is down -0.2%... in other words, US markets remain undecided, with a clear bullish bias on the small caps side, as the Russell-2000 is up +0.8% at 2,412Pts.412Pts.

As a result, Wall Street continues to widen the gap with Europe (the E-Stoxx50 falls -0.4% to 4,725 and breaks the 4,730 support level), with indexes falling steadily, with gaps of -3 to -3.5% in 48 hours, compared with -0.1% for the S&P500 (and +5% in 6 sessions).
While the pan-European index has now validated a clear break of the 4,800-point threshold (the first downside alert), the European stock market is still in a state of uncertainty.800 points (1st downside warning on Tuesday), the VSTOXX barometer measuring its volatility remains relatively contained, remaining below the 18-point level.

It is worth highlighting the resilience of the US indices in view of the US interest-rate markets, with T-Bonds erasing their initial gains and the '10-yr' back above 4.435% (worst level posted on Tuesday evening) to settle at 4.45%, and the '30-yr' stretching +3.3Pts to 4.611%.
It's not certain whether this is linked to the CPI (US consumer price index): according to the Labor Department, inflation rose by 0.2% 'sequentially' 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%).

"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 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 solid 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 Labor Office (ILO) rose by 35,000 on the previous quarter, to 2.3 million people, according to Insee.
On the European bond front, the Bund fell by +3.3Pts to 2.385%, our OATs by +2Pt to 3.151%.... but Italian BTPs remain unchanged at 3.635%.
On the FOREX, the Dollar climbs +0.5% against the Euro, which shatters its April 15 low of 1.0625E and falls back to 1.0570, its 'lowest' since October 31, 2023.
The '$ Index' soars 0.45% to 106.50, its best mark since the end of October 2023.

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 the Solférino own 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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