CAC40: 8th session up, OAT/Bund spread falls +75Pts

(CercleFinance.com) - The week got off to a flying start, with the CAC40 gaining 1% around 4.
30 pm and climbing to 7,510pts.
The lead is narrowing slightly, with the US indices consolidating after an impressive series of consecutive record highs last week.
The Dow Jones is down -0.3%, the Nasdaq is down -0.8% (led by Nvidia with -3.6%) and the S&P500 down -0.6%.
The VIX rebounded by +8% to 13.6, having fallen back into the "strong complacency" zone to 12.6 before the weekend.

The CAC40 (+0.8%) is trying to hold on to the 7.500 is the 8th consecutive session of gains, i.e. +360pts (almost +5% in a straight line) and the 'luxury' sector continues to be the driving force (Kering +4.1%, LVMH +3.6%, Pernod-Ricard +2.8%), supported by the banking sector (+2.2% for Société Générale, +2.1% for BNP Paribas).
As expected, there was no stock market psychodrama after the censure", observes Christopher Dembik, Investment Strategy Advisor at Pictet AM.

In fact, since the scenario of the Barnier government's downfall appeared inevitable (3 sessions before the vote), the CAC40 has not stopped climbing!

The reality is that the market has perfectly understood that a debt crisis in France is a fantasy scenario", explains the analyst.

Although the Paris market got back on track last week, it is far from certain that the Bourse de Paris will see a very positive end to the year, says the professional.

Now that the censorship episode has passed, the question is whether the CAC 40 is likely to stage a Christmas rally," asks Christopher Dembik.

"We think it's going to be complicated," he believes.

In his view, it would not be altogether surprising if the CAC 40 ended the year below the symbolic 7,000-point mark, which would correspond to a decline of around 7% for the year as a whole.

But on this Monday, the CAC40 is only 1% away from turning positive again for the year 2024.
Clearly, this remains a singular counter-performance, given that the Euro-Stoxx50 has gained +10.5% (this Monday, it returned to the 5,000 mark), the DAX +20.5%... which remains modest compared to the +27 on the S&P 500 or the +32% on the Nasdaq since January 1.

Fears that the ECB will opt on Thursday for a limited 25bp cut in its key rates - rather than a more aggressive 50bp easing - could also weigh on the trend and prevent the traditional "Christmas rally".

Faster rate cuts would, in our view, be better suited to the European economic situation, but the euro's decline seems to be scaring off central bankers", notes François Rimeu, senior strategist at Crédit Mutuel AM.
However, the session was positive for Euro-denominated debt, with -0.7Pts on Italian BTPs at 3.195%, +0.5Pts on Bunds (2.120%) and -0.5Pts on our OATs at 2.8720%: the OAT/Bund spread continues to contract, now at around 75 basis points (versus 88 basis points 10 days ago).
On the other side of the Atlantic, T-Bonds are down +4pts to 4.188%, and the 2-year is down +3pts to 4.1280%.

In addition to monetary policy, investors are gearing up for Wednesday's release of the US consumer price index, which will be particularly closely watched a week ahead of the Fed's final meeting of the year.

According to consensus, US inflation is expected to have accelerated to +0.3% month-on-month in November, after coming in at 0.2% in October.

On the energy market, oil prices were back on the rise on Monday, buoyed by the reappearance of geopolitical risk and concerns about unrest in Syria following the fall of President Bashar Al-Assad, but there was no panic as Brent crude recovered just 1.8% to $72.3 a barrel (an ordinary day for black gold).

In other French company news, Alstom reports an order worth almost 520 million euros, to supply SNCF Voyageurs with 35 additional RER NG trainsets for the RER E line of the Île-de-France Mobilités network, under the framework contract signed in 2017.

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