CAC40: down after German IFO, W-Street breaks 2 records

(CercleFinance.com) - The Paris Bourse (+0.
1%) is going nowhere and seems to be stuck at 7,260/7,270, despite 2 new all-time highs broken by the Dow Jones (+1.1% to 44,815) and the S&P500 (+1% to 6,021).
Even though gains are narrowing to +0.9% and +0.4% on Wall Street, the CAC continues to underperform, as does the E-Stoxx50 with +0.3%.

The US indices seem to be doing everything in their power to respect the tradition of a Wall Street rally ahead of the American Thanksgiving holiday.
The Paris market is still not recovering from its fifth straight week of declines: on the contrary, Wall Street seems well on its way to a 6th week of outperformance, with a 1% differential at time 'T'.
The year-to-date performance of the S&P 500 index (+25 to +26%) is more than five times that of the Euro STOXX 50 over the same period.

On Wall Street, the week will be shortened as US equity markets will be closed on Thursday and will only reopen for half a session on Friday.
This time of year, traditionally marked by low trading volumes, is generally characterized by a continuation of the trends seen in previous weeks.

This Monday's pleasant surprise came not from the geopolitical sphere (where things remain very tense) but from bonds, with a sudden -11.5Pts easing in US 10-year and 30-year yields (4.30% and 4.48% respectively), and -7Pts on the 2-year.
In Europe, it was more timid, with -5Pts on Bunds at 2.2040% and -3.8Pts on our OATs at 3.015%.
The yield differential to the detriment of the dollar is allowing the euro to soar back up +0.8% above 1.0500, after testing $1.034 on Friday.

While market participants have reacted little to the recent upsurge in tensions linked to the Ukrainian conflict, they are keeping a close eye on any new developments concerning the health of the Old Continent's economy.

Against this backdrop, they will be paying close attention on Friday to the latest eurozone inflation figures for November, which should confirm that a return to the ECB's 2% target is imminent.

"The ECB will have no choice but to adopt a more accommodating stance in the face of the zone's cyclical challenges, which will normalize cyclical inflation", believes Alexandre Hezez, strategist at Richelieu Group.

More aggressive rate cuts than expected could lead to a further weakening of the euro, already back to two-year lows against the dollar last week, and at the same time restore some color to European export stocks.

Germany's Ifo business climate index, which was released this morning, confirms the difficult times currently facing Europe's leading economy, a factor which is also behind the underperformance of European equities.

After rebounding in October after four consecutive months of decline, the business climate index fell again in the month just ended to 85.7, compared with 86.5 last month. Economists were forecasting a figure of around 86.

On Wall Street, on the eve of the Thanksgiving weekend, investors will be paying close attention to the second estimate of US GDP for the third quarter, which came in at 2.8% on first reading.

But on Thursday, they will also be focusing on the release of PCE inflation figures, the Federal Reserve's favorite indicator of price dynamics.

These figures, along with the minutes of the Federal Reserve's latest monetary policy meeting due on Tuesday, could reinforce or, on the contrary, weaken the scenario of a rate cut in December.

The retail sector is also likely to attract investors' attention on Friday, with the "Black Friday" shopping extravaganza designed to gauge the state of consumer spending in the run-up to the crucial holiday season.

Among the companies yet to publish their quarterly results, American groups Dell, HP, Autodesk, Best Buy and Abercrombie & Fitch are scheduled to unveil their accounts on Tuesday.

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