CAC 40: almost unaffected by the Wall Street slump

(CercleFinance.com) - The Paris Bourse is expected to rise on Tuesday morning, despite Wall Street's sharp decline the previous day, when the threat of recession prompted a sudden return of risk aversion.


At around 8.15am, the CAC 40 future contract was up 25.5 points at 8081 points, confirming the Paris index's recent tendency to outperform the New York markets.

US equity markets suffered their worst session of the year yesterday, weighed down by comments made over the weekend by Donald Trump, who did not rule out the possibility of a recession as a result of his administration's economic "transition".

"With the US government pushing for significant cuts in the federal workforce, we have every right to fear a prolonged stagnation in activity", worries Quasar Elizundia, strategist at Pepperstone.

As a result, the Dow Jones gave up 2.1% on Monday evening, the S&P 500 lost 2.7% and the Nasdaq Composite fell just 4%.

For the technology-weighted index, this was its worst session since September 2022.

Even more spectacularly, the VIX volatility index - often considered a barometer of fear - jumped 19% to 27.9, reaching a new annual zenith.

In addition to Trump's shock announcement about the possibility of a US recession, investors also appear increasingly concerned about another unfavorable scenario, that of 'stagflation'.

Recent economic indicators published on the other side of the Atlantic have confirmed that inflationary pressures persist, while growth is showing signs of running out of steam.

Caution should therefore logically prevail on the eve of the publication of the US Consumer Price Index (CPI), which should show that inflation is struggling to ease.

In the short term, it remains difficult to advise buying on the lows", says Michael Brown, at Pepperstone.

"From my point of view, a pessimistic view is justified given that growth forecasts are being revised downwards, weighing on corporate earnings estimates", adds the analyst.

The Pepperstone strategist adds that the uncertainty surrounding White House policy is not currently offset by the prospect of Fed support.

The American-Ukrainian meeting scheduled for Tuesday in Saudi Arabia is also likely to capture the attention of market participants.

'We hope that these talks will be more productive than Zelenskyy's last visit to Washington, which resulted in the suspension of military aid and intelligence cooperation with Kiev', say Danske Bank staff.

Renewed worries on the economic front are prompting investors to seek refuge in the safest assets, in particular through an influx of purchases of government bonds, which is driving down their yields.

In the United States, the yield on ten-year Treasuries is down by more than ten basis points at 4.21%.

In Europe, the German ten-year is virtually unchanged at 2.82%.

On the currency markets, the dollar is not benefiting from its safe-haven status, as the euro is still nibbling away at 1.0875 against the greenback this morning.

Crude oil prices are stagnating as uncertainties over US growth add to the increase in OPEC+ supply, leading analysts at BofA to envisage a return of Brent to $60 a barrel.

Brent crude is up 0.1% to $69.3 this morning, while US light crude (West Texas Intermediate, WTI) is stable at around $66.

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