CAC40: luxury goods in the spotlight, record-breaking Wall Street results

(CercleFinance.com) - Boosted by luxury goods and a deluge of record highs on Wall Street, the Paris Bourse is up sharply: the CAC40 index is up 1.
31% at 7,427 points, marking the 7th consecutive session of gains (5/5 this week) and the best trading day since September 29.

On Wall Street, the S&P500 (+0.2%) and Nasdaq (+0.5%) set their 3rd consecutive record this week... and the VIX symmetrically fell back into the complacency zone at 13.00.

Despite the adoption of the motion of censure which brought down the Barnier government on Wednesday evening, the Paris market ended yesterday's trading session with a gain of 0.4%.

With a weekly rise of +2.7%, the CAC puts an end to a series of six consecutive weeks of declines, as the government's overthrow opens up a new period of political uncertainty in France.

Many analysts point out that the Paris index has weathered the turbulence rather well so far.

The fall of its minority government and the rejection of its ambitious austerity budget do not necessarily mean an immediate and major financial crisis," say the teams at Banque Richelieu.

"We do not expect the French disorder to trigger a crisis of confidence in the euro similar to that of 2010-2012."

Another very reassuring sign is that the France-Germany interest-rate spread has contracted to just 75 basis points, showing that for the time being investors are not alarmed.

Bunds are tightening by 1.2Pts to 2.1160% (industrial production is down -1%), our OATs are easing by -1.3Pts to 2.870%, i.e. around 76Pts 'spread' compared with over 88 a week earlier.

In his address broadcast last night, President Macron pledged to appoint a new prime minister 'in the next few days', while ruling out resigning by the end of his term.

Following the French tumult, investors will refocus on the economic indicators scheduled for the day.

The US Labor Department's monthly report showed 227,000 non-farm jobs in November, according to the Labor Department, a number slightly above economists' expectations, which were generally in the region of 200.000.

The unemployment rate, however, rose by 0.1 points to 4.2%, where stability at 4.1% was anticipated, while the labor force participation rate stood at 62.5%, and average hourly earnings rose by 4% year-on-year.

In addition, non-farm job creations for the previous two months were revised, from 223,000 to 255,000 for September and from 12,000 to 36,000 for October, for a total revision balance of +56.000 for these two months.

Despite these very robust figures, T-Bonds are easing by 1Pt towards 4.1700%: the probability of a rate cut on 18/12 stands at over 70%, compared with 66% a week ago, according to the FedWatch barometer of stock market operator CME Group.

The preliminary calculation of the University of Michigan's consumer index shows a rise in confidence, to 74 this month, after 71.8 in November and 73.3 expected by economists.

While the sub-index measuring changes in consumer expectations deteriorated to 71.6, compared with 76.9 last month, the sub-index assessing consumers' assessment of their current situation jumped to 77.7, after 63.9 in October.

On the currency markets, the euro was unaffected by the censure of the Barnier government: it even strengthened its recovery this morning against the dollar, returning to the 1.0575 zone.... but the 'NFP' boosted the greenback, which rose by 0.3%, with the euro retreating towards $1.0555.

Oil prices fell this afternoon by -1.5% (Brent below $71.1) despite the prospect of a lasting reduction in OPEC supply.

US light crude (West Texas Intermediate, WTI) fell by 1.4% to $67.3.

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