Cac 40: The trajectory of Fed rates worries more than geopolitics, the CAC 40 limits its gains

(BFM Bourse) – The Paris Stock Exchange ends its series of four sessions of decline and gained 0.43% this Monday, despite a tense geopolitical context. Investors’ doubts about the Fed’s rate trajectory remain significant in the background.

For the first time in four sessions, the Paris Stock Exchange closed in the green despite a turbulent geopolitical context. The CAC 40, however, clearly reduced its lead to 0.43% at 8,045.11 points after having gained up to 1.3% to 8,126.38 points, at the zenith of this Monday session.

The macroeconomic agenda of the day was rather sparse. Operators have, however, taken note of retail sales in the United States for the month of March. This indicator, which measures the mood of American consumers, turned out to be more dynamic than expected. American household spending increased by 0.7% over one month compared to February, where analysts were counting on a more contained increase, of 0.3% still on a monthly basis.

This new statistic demonstrates the robustness of the American economy. One more, after the confirmation the previous week of a significant increase in inflation in the United States. Remember that the inflation figures in the United States for the month of March were higher than expected – excluding energy and food prices – at 3.8% year-on-year in March, against a consensus of 3, 7%.

Enough to further encourage members of the American Federal Reserve (Fed) not to rush to lower key rates. Investors are also less optimistic about the trajectory of the American Federal Reserve’s rates. According to the CME Fedwatch tool, markets are betting on two rate cuts in 2024.

As a result of these expectations of lower rate cuts in the United States, bond yields have risen significantly. The yield on 10-year US debt stood at 4.642% compared to 4.497% on Friday. Investors are therefore more worried by the timing of the Fed’s rate cuts than by the latest events that occurred this weekend in the Middle East. Remember that during the night from Saturday to Sunday, Iran carried out an unprecedented attack on Israel by launching more than 300 drones and missiles against the Jewish state. This offensive was a response to the attack in early April on an Iranian consulate in Damascus that Tehran had attributed to Israel.

The Israeli army said that 99% of Iranian shots were intercepted. On Sunday evening, Iran called on Israel not to retaliate.

However, this attack had been anticipated by the market and oil prices did not soar. The June contract on North Sea Brent fell 1.2% to $89.38 per barrel while the May contract on WTI listed in New York also lost 1.2% to $84.61 per barrel.

Defense on the rise

On the stock side, Totalenergies fell by 1.2% in line with the decline in oil prices.

Air France-KLM fell by 2.3% despite this decline in black gold prices. The title of the Franco-Dutch company suffered from the lowering of the annual objectives of the German group Lufthansa, citing “still unpredictable” effects of tensions in the Middle East, and strikes.

Defense actions gained some ground with Iran’s attack. Thales jumped 0.8% and Dassault Aviation gained 1.5%.

LVMH gained 1.7%, 24 hours before the publication of its first quarter turnover.

BNP Paribas climbed 0.6%, after announcing this weekend the purchase of the conglomerate Fosun’s stake in the Belgian insurer Ageas, for an amount of 730 million euros.

The cable manufacturer Nexans jumped 2.7% while its great Italian rival Prysmian gained 8% on the Milan Stock Exchange, after announcing the takeover of the American Encore Wire for an enterprise value. of 3.9 billion euros.

On the foreign exchange market, the euro is stable against the dollar at 1.0643 dollars.

Sabrina Sadgui – ©2024 BFM Bourse

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