CAC40: loses initial gains, W-Street directionless

(CercleFinance.com) - The Paris Bourse got off to a good start in the wake of Wall Street (2 new records) and Tokyo (+1.
9% this morning), but the CAC40 fell from a high of 7,319 (+1.1%) to equilibrium, and even slipped back into negative territory (-0.1% to 7,230, i.e. -4% on 2024).230, i.e. -4% over 2024).

Once again, our stock market is weighed down by the climate of political and budgetary uncertainty that persists in France... and is glaringly underperforming other European markets (+0.3% on average), notably Frankfurt.
The DAX40 set a new all-time record, surpassing the emblematic 20,000 mark (+19.2% since January 1)... at a time when the German economy is in a coma, against the backdrop of completely uncertain and 'illegible' parliamentary elections (which coalition and which political project for one side or the other?) on February 23.

However, investors are keeping a cool head in the face of the latest developments in the French National Assembly, where the Barnier government now appears to be on the brink of collapse.

While the Prime Minister decided yesterday to use the 49.3 to push through his Social Security financing bill, Marine Le Pen, president of the far-right group in the Assembly, announced that her group was planning to table a motion of censure.
Some Socialist and EELV members have publicly declared that they will not vote for the motion to avoid participating in the 'chaos'... will enough of them defect to the 'group instructions'?

While analysts fear a prolonged period of political turbulence, the current impasse raises fears for the even more crucial issue of the country's budgetary situation and a possible spike in its borrowing costs.

The formation of a new government with broader support is likely to be very difficult", warn Commerzbank's teams.

"Indeed, the center does not have a majority, and a compromise between it and the more moderate parties of the left-wing spectrum is likely to be difficult to find", worries the German bank.

The German bank concludes: "All this suggests that the consolidation of France's public finances will be very slow, especially as there will be no noticeable upturn in the economy".

All these concerns seem to be enough to keep the Paris market falling, with losses of 9.5% over the past six months, just before the dissolution.

The Paris Bourse is brooding," sums up Christopher Dembik, Investment Strategy Advisor at Pictet AM.

"Economic statistics are poor, particularly manufacturing and service sector PMIs. For months now, they have been well below 50 and anchored at extremely high levels of contraction, which bodes ill for the French economy", he stresses.

"Against this backdrop, it would not be surprising if the CAC 40 ended the year below the symbolic 7,000 points and therefore in negative territory, while the S&P 500 is up over 25% year-on-year", notes the analyst.

On the currency markets, the euro is recovering slightly against the dollar, rising from 1.0490 to 1.0520 (+0.25%), as renewed political uncertainty in France is seen as an unfavorable factor for the single currency.

Brent crude oil prices are up +1.1% to $72.75, two days ahead of the OPEC meeting, with WTI up 1.3% to $69 a barrel.

Analysts at DeftHedge, a specialist in currency and commodity risk management, nevertheless note that black gold prices 'remain stuck near key support levels' and that 'fundamentals still argue for a long-term price decline'.

It's been a quiet day on the bond front, in the absence of stats and market movers: our OATs are easing a little towards 2.892% (-2.2pts), Bunds are virtually stable (+0.6pts at 2.0400%), and Italian BTPs are shedding -1pt at 3.2520%.

In the news for French companies, Edenred has announced the extension of its share buyback program to up to 600 million euros (from 300 million) over the next three years, with the aim of cancelling the shares bought back.

The company also announced that it had finalized the acquisition of IP's energy cards business, a move that will make it the second-largest player in the Italian market.

Sanofi plans to invest around one billion euros in the construction of a new insulin production site based in Beijing, according to official information relayed on Tuesday.

Finally, Legrand announces the acquisition of Power Bus Way, a leading North American specialist in Cable Bus power busbars, mainly for data centers.


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