CAC40: +3.2%, a whiff of euphoria after the US ‘U-Mich’ survey

( – After the extreme pessimism of the middle of the week, here comes a wave of unbridled euphoria: the Paris stock market exploded by +3.2% to 6,075, which brings the weekly gain to more than 3% ( the SBF-120 recrosses the bar of 4,700 Pts).
This comes after a re-test of the March 7-8 lows (5.830/5.
850 and 4,500 for the SBF) and a spectacular easing in the long rate compartment which encourages – with a 48-hour lag – operators to reinvest in the equity market.

On the bond market, in fact, the yield on ten-year Treasuries confirms its return towards the psychological threshold of 3%, while it was still flirting with the 3.5% mark last week.
Our OATs are oscillating on either side of 2.00% against 2.48% a week earlier.
The CAC40, which was already gaining almost +2% at the start of the afternoon, suddenly accelerated upwards after the publication of a household confidence barometer (University of Michigan or ‘U-Mich’) which is revised slightly down (to 50 versus 50.2) but above expectations (48).
This ‘less worse than expected’ comes at the right time: consumers are showing themselves to be a little less pessimistic about the outlook for inflation while fuel prices have just fallen below the psychological $5 mark in gas stations in most states (except California).

Another supporting factor, the Commerce Department announces a surprise rebound of 10.7% in new home sales in the United States in May, i.e. an annualized CVS volume of 696,000 against 629,000 in April (revised figure of 591,000 in estimate initial).

The median price for US new home sales was $449,000 last month. The stock of new homes ready for sale represented 7.7 months at the current absorption rate.

Wall Street seized on these good figures to accelerate upwards after a good start to the session: the Dow Jones takes more than 2% to 31,300 while the S&P500 (+ 2.3%) is approaching 3,900Pts, the Nasdaq fuses by +3%.

But the most cautious investors still have solid arguments for not rushing to buy in ‘FOMO’ mode: the business climate in Germany, measured by the IFO institute, is deteriorating again, to 92.3 in June, after 93 the previous month, which thwarts a consensus expecting a rebound towards 94.

“While inflation is expected to remain high and the country’s gas supply looks increasingly precarious, the chances of the country falling into recession this year have increased significantly,” warns the economic analysis office.

Pointing to both the threat of gas rationing in industry and the risk of recession in the United States due to Fed rate hikes, Commerzbank for its part lowered its growth forecast for Germany in 2023 from 2.5% to just 1%.

In France, INSEE is revising its inflation estimate upwards from 6 to 6.8% by October, for an annual average of 5.5%, growth should nevertheless remain sustained with +2.3% , i.e. more than twice that anticipated in Germany.

On the energy front, the barrel of Brent (+1.5%) remains in its bullish channel, beyond $111.5 a barrel of WTI flirts with $106 in New York.

In securities news, Stellantis announced on Friday that it would become a shareholder in the low-carbon lithium production company Vulcan Energy, an investment of 50 ME for 8% of the capital, described as “highly strategic” by its managing director Carlos Tavares.

Sanofi and GSK announce positive data from the trial of their bivalent vaccine D614 and Beta (B.1.351), ‘the first candidate to demonstrate its efficacy, in the context of a placebo-controlled trial and in a context of high blood circulation variant Omicron’.

Finally, Airbus said last night that it had signed a memorandum of understanding with Munich International Airport. The idea is to develop CityAirbus NextGen, an electric vertical take-off and landing (eVTOL) aircraft, while Munich Airport will offer ground infrastructure services and solutions.

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