CAC40: W-Street's resilience saves the day in Europe

(CercleFinance.com) - Wall Street's resilience is working wonders, and the risks of (nuclear) escalation between NATO and Russia are deemed low.


The CAC40 is down just 1% this evening (towards 7,205), penalized in particular by the decline in the 'luxury' and automotive sectors, with -2.7% for Stellantis and -2% for Renault.
The Euro-Stoxx50 also trimmed its losses to -1.1%, a fairly trivial score given the geopolitical backdrop.
The Paris stock market had suddenly dropped by more than 1.3% around 10:00 a.m., and broke through the 7.200 with the rumour (soon officially confirmed) that the first 6 ATACMS (medium-range) missiles had been fired from the Ukraine at Russia, with NATO satellite assistance.

This is the ultimate 'red line' set by Moscow, which reserves the right to retaliate with nuclear weapons in the event of an attack on its territory by a weapon of mass destruction launched by a foreign power (nothing original: all the Western nuclear powers have the same doctrine in the event of aggression).

After Zelensky's threats on Sunday ('the missiles will speak for themselves'), the 'rumour' became official information (BBC, AFP, Russian media, etc.) and the CAC40 increased its share price.) and the CAC40 increased its losses to -1.8% (below 7,140).
But the CAC is now down by only -1%, as Wall Street is showing great composure (the USA is far from Ukraine), since the US indices are now close to equilibrium: they are losing only a few fractions (S&P500 virtually stable) to -0.4% (Dow Jones back down to 43.000).

The Nasdaq is now up +0.4% as investors are clearly betting that Putin is bluffing and that Ukraine is just upping the ante to negotiate a settlement from a position of strength.

But there are other very real reasons for concern, such as signs of sluggish growth in Europe, political uncertainty in France (will the Barnier government be censured?), weak domestic demand in China and customs tariffs on exports, not to mention Donald Trump's recent victory, deemed unfavorable to European companies (higher customs tariffs).

The publication late this morning of the final figures for inflation in the euro zone in October does not argue in favor of further rate cuts by the ECB.
Confirming the first estimate published at the end of October, the inflation rate rose from 1.7% to 2% year-on-year in the region last month, due to unfavorable base effects, particularly in Germany.

The strongest contributions to the eurozone's annual inflation rate came from services (+1.77 percentage points, pp), followed by food, alcohol and tobacco (+0.56 pp), industrial goods excluding energy (+0.13 pp) and energy (-0.45 pp).
The highest inflation rates were recorded in Romania (5.0%), Belgium and Estonia (4.5% eachе).

European fixed-income markets are not moved by this... but the tense geopolitical climate is prompting a wave of risk-off in favor of bonds, which is squeezing yields: Bunds are shedding -3.5pts to 2.337%, our OATs -2.5pts to 3.075% and Italian BTPs only -2.4pts to 3.550%.
Across the Atlantic, '10-year' T-Bonds are easing -4.5pts to 4.3710%, ditto for the '30-year' to 4.56%.

The suddenness of the recent rise in US government bond yields took many analysts by surprise, and largely contributed to Wall Street's sharp decline last week.

The dollar, a traditional safe-haven asset, has just erased its initial gains, and the euro is now down just 0.1% at $1.0585.

After a roller-coaster week on Wall Street, investors are feverishly awaiting Nvidia's results, which could give the stock market fresh impetus tomorrow evening or, on the contrary, provoke a new bout of anxiety.

Analysts are expecting the AI giant, as usual, to publish better-than-expected accounts accompanied by an increase in targets, especially as the chip designer begins to reap the benefits of the recent launch of its new architecture, dubbed 'Blackwell'.

On the oil market, black gold prices eased back from the previous day's surge, due to geopolitical factors following Joe Biden's authorization for Ukraine to carry out long-range strikes on Russia.

At $73.1 a barrel, Brent crude was down 0.1% in London, following a +2.8% surge the previous day.

In this tense climate, gold regained favor with investors, reaching $2,630 an ounce (+0.5%), after a sequence of declines that had seen it fall some 9% from its recent highs.

In French company news, TotalEnergies announced a partnership with Oil India Limited (OIL) to use AUSEA technology to detect and measure methane emissions at OIL sites in India.

On Tuesday, Havas, Vivendi's communications and marketing subsidiary, unveiled its medium-term objectives in the run-up to the completion of its demerger, expected next month. At an investor day held today, Havas said it was aiming for an annual adjusted operating margin (Ebit) of between 14% and 15% by fiscal 2028.


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